LONDON: A new index from the UK's Chartered Institute of Purchasing & Supply (CIPS) says risk to the world's supply chains has tripled since 1994.
CIPS cites the onset of globalisation, the economic crash of 2008 and subsequent Euro crisis for a rise in the score from 23.7 to 79.8 today.
Developed with the help of Dun & Bradstreet (D&B), the index highlights the disparity of risk amongst developing countries often grouped together such as BRIC and MINT (Mexico, Indonesia, Nigeria, Turkey). So while BRIC members China and India have remained a medium risk, Russia has consistently posed a high risk to businesses and economies that rely on its oil and gas exports. Likewise Mexico, a medium risk for the past 20 years, is compared to Nigeria th
at continues to be a high risk with Turkey and Indonesia fluctuating between the two.
CIPS says sanctions on Russia's energy sector would result in significant cost to European companies as the country remains responsible for half of Eastern Europe and Central Asia's supply chain risk in 2014.
Noting a "serious skills gap as inadequately trained supply chain professionals try to assess risk in an increasingly globalised world," CIPS says its quarterly index will provide companies with an insight three or four tiers down supply chains.
David Noble, CIPS group CEO commented: "The resurgence in the global economy depends very much upon the reliability of global supply chains. With political instability across the developing world, it is vital that businesses and economies recognise the risks to their supply chains and make the appropriate provisions before it is too late."
Lee Glendon, a D&B supply chain risk specialist, added: "Turmoil in the Ukraine and potential contagion to supply chains in Russia have dominated the headlines recently and for some companies it is only when the event occurs that they look to understand its impact and develop alternative supply options."
A meeting of G7 energy ministers in Rome recently agreed to reduce dependency on Russia that supplies 30 percent of Europe's gas – with 40 percent of it delivered via the Ukraine. Meeting with his counterparts from the U.S. Germany, Canada, France, Italy and Japan, UK energy minister Ed Davey was reported as saying: "We have taken a strategic decision and will face up to the use by Russia of energy as a weapon. Putin has crossed a line."
CIPS notes "encouragement can be drawn" from a reduction in supply chain risk in Q1 2014 following improved economic prospects in Germany, USA and the UK.
DUBAI: A report from business analysts IHS suggests Dubai will make an US$8 billion cargo infrastructure investment along with US$10 billion in private sector contributions to help position the GCC as a global cargo leader by 2020.
Richard Clayton, chief maritime analyst at IHS says: "All eyes will be on Dubai in 2020 as it hosts the WorldExpo event and it is promising to be the biggest yet. New roads, a peninsula-wide rail project, another airport, hotels, energy plants and event venues will generate project cargo on a grand scale."
Noting the region is home to the Jebel Ali mega facility and the world's largest man-made port, IHS forecasts that by the end of the year it will have an annual container capacity of 19 million TEUs rising to 20 million by 2020.
In partnership with the new Dubai airport, IHS expects Jebel Ali to generate as much as 12 million tonnes of sea-air cargo, five times more than the current level, "as the country positions itself as the port for Africa, the subcontinent and the Middle East."
According to IHS chief economist Nariman Behravesh: "Economies considered to be 'dull and old' - like those of the US, Germany, UK and Japan - will drive the global recovery in 2014. The return to global growth will have a very positive impact on the Middle East, especially the Gulf countries," he added. "We are seeing consumer spending is on the rise, the regional unemployment rate will be below that of France, Germany and Italy for the next three years and compound annual growth rates are forecast to be above-average through 2035."
The IHS study says the region presents investors with significant growth opportunities across defense, chemical, automotive, energy and maritime sectors to 2020. In addition to the spending on a new maritime infrastructure, the region's defence spending is forecast to total US$920 billion in the next six years; investments in the chemical industry will produce an eight percent year-on-year growth by 2016; automotive light vehicle sales will grow 30 percent by 2020; and growth in demand for energy will require US$350 billion of new investment during the period.
MARSEILLE: CMA CGM has reported revenues of US$15.9 billion for 2013 – basically unchanged from the previous 12 months. However the consolidated net profit rose 22.8 percent to US$408 million in a year described by group executive officer Rodolphe Saadé as "difficult".
The company said volumes rose 7.5 percent to 11.4 million TEUs, above the average market 
growth of three percent for the year, while revenue per TEU fell 7.1 percent.
Saadé (right) commented: "We successfully reduced our costs while increasing our volumes carried much faster than the market, enabling us to report one of the industry's best financial performances. In this way, year after year, we are reinforcing our position as the world's third largest container shipping company. With these solid fundamentals and the pioneering spirit that has always been our strength, we are committed in 2014 to maintaining our profitability and driving faster growth."
CMA CGM says the combination of a new e-commerce platform and the launch of two new 16,200-TEU megaships helped drive a 5.3 percent reduction in costs per TEU and a resulting operating margin of 4.8 percent.
The company is forecasting global container volumes to grow 4-5 percent in 2014 and despite an initial rate spike at the beginning of the year, expects continued volatility due to a "persistent mismatch between supply and demand."
In addition to cost-controls and what it describes as "assertive marketing", corporate plans for 2014 will focus on the launch of new services and the development of port infrastructure – particularly in Africa. CMA CGM says it is also benefiting from the growth in its energy-efficient reefer container fleet that should account for 48,000 units by the end of the year.
WASHINGTON, D.C.:The U.S. Federal Maritime Commission (FMC) has approved the G6 alliance agreement for services linking Asia and U.S. West Coast ports and between North Europe and all U.S. coastal gateways beginning April 04, 2014.
The G6 is composed of American President Lines, Hapag Lloyd AG/USA, Hyundiai Merchant Marine, Mitsui OSK Lines, Nippon Yusen Kaisha, and Orient Overseas Container Line.
The agreement will last until March 01, 2016 and automatically renew for additional one-year terms unless terminated by one or more of the members 12 months after March 01 2015.
Initially, the six companies are allowed to coordinate and share space on 58 container vessels with a maximum capacity of 10,000 TEUs, rising to 220 ships with a maximum capacity of 14,000 TEUs.
The FMC said its decision was based on a determination that the agreement is not likely to lead to a reduction in competition or produce and "unreasonable" increase in costs to the shipper.
FMC chairman Mario Cordero commented: "The commission's action on the G6 alliance is based on an extensive, competitive analysis conducted by the commission's staff and comments received by shippers and other industry participants. The commission will continue to review the competitive impact of global alliances. This alliance will considerably increase available capacity in the expanded geographic scope, and has the potential to generate operational efficiencies and positive environmental benefits."
The countries included in the agreement are: Belgium, Canada, Egypt, France, Germany, Hong Kong, Italy, Jamaica, Japan, Korea, Malaysia, Mexico, Netherlands, Panama, People's Republic of China, Saudi Arabia, Singapore, South Korea, Spain, Sri Lanka, Taiwan, Thailand, UAE, United Kingdom and Vietnam.
BRUSSELS: In what is described as an unprecedented degree of cooperation, the world's leading motor manufacturers have agreed a set of standards for suppliers on key responsibility issues including human rights, environment, working conditions and business ethics.
Two leading corporate responsibility business associations, AIAG and CSR Europe said BMW Group, Chrysler Group, Daimler, Fiat, Ford, GM, Honda, Jaguar/Land Rover, PSA Peugeot Citroen, Scania, Toyota, Volkswagen, Volvo Cars and Volvo Group had signed up to principles designed to enhance supply chain sustainability.
AIAG is a not-for-profit organization where OEMs, suppliers, service providers, government entities and academia have worked to remove costs and complexity from the supply chain via harmonized business practices.
CSR Europe is a European business network representing 63 corporate members and 38 national partners to share best practice on corporate social responsibility.
Scot Sharland, executive director at AIAG commented: "Automakers and suppliers of all sizes face heightened compliance & extended responsibility expectations, from materials sourcing, handling, reporting and disposal requirements to improving factory working conditions, so it's imperative that we work together to develop, socialize and deploy industry best practices on a range of issues for our global supply chains."
The guidelines, based on fundamental principles of social and environmental responsibility, were first developed by AIAG in 2009 in collaboration with Ford, GM, Chrysler, Honda and Toyota.
"People and the environment are the automotive industry's most important resources. For this reason, we are working together to attain the highest standard in business integrity and in the social and environmental performance of our supply chain... We expect that suppliers will uphold these standards and cascade them down their supply chain," added Sharland.
IRVING, TX: Responding to a shareholder initiative for information on its asset risk policy due to climate change, ExxonMobil says it has no plans to leave any oil in the ground as it will be needed to meet future global energy demand.
"Our analysis and those of independent agencies confirms our long-standing view that all viable energy sources will be essential to meet increasing demand growth that accompanies expanding economies and rising living standards," said William Colton, ExxonMobil's vice president of corporate strategic planning.
The company's announcement coincides with the latest UN Intergovernmental Panel on Climate Change (IPCC) report that says the effects of climate change are already occurring on all continents and across the oceans. It adds that in many cases, the world "is ill-prepared for risks from a changing climate."
Responding to the idea of oil sequestration in order not to exceed global warming by two degrees Celsius by 2100, ExxonMobil says this "low carbon scenario" would, by 2030, cost the average American household an additional $2,350 per year for energy, or five percent of total before-tax median income.
As a result, ExxonMobil thinks such costs would have an impact that is "beyond those that societies, especially the world's poorest and most vulnerable, would be willing to bear."
The company also cites a 2008 report by the International Energy Agency that says the cost of reducing greenhouse gas emissions to 50 percent below 2005 levels by 2050 would require the annual building of 24-32 one-thousand-megawatt nuclear plants, 30-35 coal plants with carbon capture and sequestration capabilities, and 3,700-17,800 wind turbines of four megawatt capacity - at a total cost of US$45 trillion.
"The risk of climate change is clear and the risk warrants action," said Colton who added: "ExxonMobil is taking action by reducing greenhouse gas emissions in its operations, helping consumers reduce their emissions, supporting research that leads to technology breakthroughs and participating in constructive dialogue on policy options."
Vicente Barros, co-chair of the IPCC Working Group II noted: "We live in an era of man-made climate change. In many cases, we are not prepared for the climate-related risks that we already face. Investments in better preparation can pay dividends both for the present and for the future."
OAKLAND, CA: Following shareholder pressure, ExxonMobil is to publish its first carbon asset risk report describing how it assesses the risk of stranded assets from climate change.
The report, via the company's web site, will provide investors with greater transparency into how America's largest energy corporation plans for a future where market forces and climate regulation makes at least some portion of its carbon reserves unburnable.
The Intergovermental Panel on Climate Change acknowledges that if catastrophic warming over 2°C is to be avoided, no more than one-third of current proven carbon reserves can be burned. These reserves, currently on the balance sheets of the 200 largest coal, oil, and gas companies are valued at $20 trillion.
Yet, a recent "Unburnable Carbon" report calculates that in 2012 alone, the 200 largest publicly traded fossil fuel companies collectively spent an estimated $674 billion on finding and developing new reserves – reserves that cannot be utilized without breaking the world's carbon budget.
Sustainable wealth manager Arjuna Capital and As You Sow, a non-profit promoting corporate responsibility, agreed to withdraw a resolution at the oil major's forthcoming annual meeting in May if ExxonMobil provided information to shareholders on the risks that stranded assets pose to its business model.
Natasha Lamb, director of equity research and shareholder engagement at Arjuna Capital said companies increasingly were including unconventional 'frontier' assets on their balance sheets, such as deep-water and tar sands.
"Investors are the canary in the coalmine and will move their money to avoid material risk," she said. "Forward thinking companies need to re-assess how they allocate shareholder capital and act strategically to shift their business models. If Big Oil can't redirect capital to low carbon energy alternatives, investors will. "
LONDON: Gatwick Airport, formerly part of the BAA and now owned by a group of international investment funds including Global Infrastructure Partners, wants to start construction on a second runway before the end of the next UK parliament in 2020, with the first flights by the end of 2025.
The owners say the new runway would provide the UK with more flights, more connections and handle 11 million more passengers by 2050 than building it at Heathrow, at a fraction of the environmental cost.
Architect planner Sir Terry Farrell commented: "I have no doubt that with a second runway, Gatwick will deliver more balanced, and more widely spread, economic growth for London and the South East. Expansion at Gatwick could do for South London and the wider region what the Olympics did for East London and give a huge boost in terms of jobs, housing and regeneration."
The airport management added that a commitment to start building in the next parliament "does not in any way negate the 1979 agreement. Gatwick remains committed to the legal agreement with West Sussex County Council, which prohibits the airport from constructing a new runway before 2019."
In a related move, the UK Civil Aviation Authority (CAA) has removed price controls on cargo services at London's Stansted airport from April 01, 2014. The CAA says there is not sufficient evidence that the former BAA airport has substantial market power for its cargo services.
Iain Osborne, director for Regulatory Policy at the CAA, said: "The CAA's role in cargo is to look after the interests of the consumers who own airfreight, and they appear to have a lot of choice in the market...This gives Stansted an excellent opportunity to innovate and we expect to see competition drive the delivery of high quality services that meet the needs of both passengers and cargo owners."
WASHINGTON, D.C.: FedEx Freight, the LTL subsidiary of FedEx Corp., is to increase rates by an average of 3.9 percent from March 31 this year for shipments within the U.S. and NAFTA countries Canada and Mexico.
According to the latest CASS freight index, the move reflects the reversal of a two-month decline as overall U.S. expenditure increased 6.8 percent in February – the highest for that month in the index's history.
Total spending on U.S. freight movements was up 6.4 percent year-on-year and 15.8 percent higher than the same month two years ago. According to analyst Rosalyn Wilson, author of the monthly index, "things are looking up" although she cautions there are still "many potholes to deal with".
She notes the U.S. Institute for Supply Management's PMI reversed a two-month decline and rose 1.9 points to 53.2 in February – although still close to the index level of 50 indicating a contracting industrial economy. However new orders rose 3.3. points last month as the order backlog grew 4.0 points. Wilson says these figures point to increased production in the next few months and therefore more freight to move.
However the CASS index is not all green lights: U.S. production was down for the third month in a row, this time falling 6.6 points to below the 50 mark and therefore not good for carriers looking for increased volumes. Farther down the supply chain, China's PMI also declined in February and now sits at 50.5. And while U.S. export orders fell from 49.8 to 49.3, imports have slowed considerably - not a positive indcator for the freight industry.
Wilson, who is author of the annual logistics report for the Council of Supply Chain Management Professionals, concludes: "There are still some strong headwinds to overcome in the freight sector - the most obvious being the nearly imperceptible growth in volumes. The global marketplace remains weak, so our exports are lagging expectations. While unemployment continues to fall, the number of new jobs created each month is not enough to sustain the economy... continue to expect a bumpy ride."
LONDON: A report from global law firm Linklaters says global institutional investors have funds of US$1trillion at their disposal to spend on European infrastructure assets over the next 10 years.
Research from Oxford Analytica on the subsequent impact on the EU economy suggests Member Countries could see a further 1.4 percent rise in
their annual GDP between 2014 and 2023. The cumulative GDP impact in the next decade would translate into more
than US$3 trillion with
a multiplier effect spanning supplier industries, such as construction and raw materials, consumer spending and increased tax revenues.
The study identified investors from Canada, China/Hong Kong, the GCC region, Japan and South Korea who have increased their investments in European infrastructure assets by 465 percent in the last three years compared with the previous four.
Linklaters expects an increase in corporate disposals to provide more opportunities as higher valuations encourage companies to sell subsidiaries or stakes in them, often in a bid to reduce debt.
The company warns, however, of an impending price bubble: "There is now too much money chasing too few deals," says Georg Inderst, a consultant who wrote a study on private infrastructure spending for the European Investment Bank in 2013.
Linklaters notes: "Some investors now worry that infrastructure prices are a bubble waiting to burst. This was the terminology used by one senior executive that we interviewed, pointing to the inflated prices paid for airports across Europe. He argues that prices have soared too high, making it a question of when, not if, they will crash."
WASHINGTON, D.C.: FedEx Freight, the LTL subsidiary of FedEx Corp., is to increase rates by an average of 3.9 percent from March 31 this year for shipments within the U.S. and NAFTA countries Canada and Mexico.
According to the latest CASS freight index, the move reflects the reversal of a two-month decline as overall U.S. expenditure increased 6.8 percent in February – the highest for that month in the index's history.
Total spending on U.S. freight movements was up 6.4 percent year-on-year and 15.8 percent higher than the same month two years ago. According to analyst Rosalyn Wilson, author of the monthly index, "things are looking up" although she cautions there are still "many potholes to deal with".
She notes the U.S. Institute for Supply Management's PMI reversed a two-month decline and rose 1.9 points to 53.2 in February – although still close to the index level of 50 indicating a contracting industrial economy. However new orders rose 3.3. points last month as the order backlog grew 4.0 points. Wilson says these figures point to increased production in the next few months and therefore more freight to move.
However the CASS index is not all green lights: U.S. production was down for the third month in a row, this time falling 6.6 points to below the 50 mark and therefore not good for carriers looking for increased volumes. Farther down the supply chain, China's PMI also declined in February and now sits at 50.5. And while U.S. export orders fell from 49.8 to 49.3, imports have slowed considerably - not a positive for the freight industry.
Wilson, who is author of the annual logistics report for the Council of Supply Chain Management Professionals, concludes: "There are still some strong headwinds to overcome in the freight sector - the most obvious being the nearly imperceptible growth in volumes. The global marketplace remains weak, so our exports are lagging expectations. While unemployment continues to fall, the number of new jobs created each month is not enough to sustain the economy... continue to expect a bumpy ride."
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