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Transportation News Bulletins - Logistics

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Biodiesel Production to Drop by 50%, Analysts Predict
Monday, 24 August 2009 00:00

U.S. biodiesel production has been rocketing upward in each of the past 10 years and reached 690 million gallons last year, but industry officials and analysts said it would drop this year by half to 350 million gallons or as low as 250 million gallons.

The slash in expected output of biodiesel results from several factors: the fuel’s large price premium over standard diesel, European tariffs and delayed imposition of a federal rule requiring more use of renewable fuels.

U.S. biodiesel producers put out 690 million gallons last year—petroleum diesel prices spiked to $4.764 a gallon in July—after they made 450 million gallons in 2007, a sharp escalation from just 25 million gallons in 2004, according to the National Biodiesel Board’s Web site.

“Some 350 million to 250 million gallons is the current estimated production level for 2009, which, of course, is subject to change,” Michael Frolich, NBB’s spokesman, told Transport Topics.

“We probably ran at 50% of capacity last year, while we’ve dropped to running at 20% of capacity this year, because it’s certainly a tough market right now,” said John Whittington, co-owner of Integrity Biofuels, Morristown, Ind.

Whittington told TT that Integrity’s capacity is 5 million gallons of biodiesel annually, or about 14,000 gallons a day.

Sources agreed that rising costs of raw materials were a factor in the lower production, but they differed in their views about the influence of the Environmental Protection Agency and European tariffs on U.S. biodiesel.

The Oil Price Information Service reported Aug. 5 that the average U.S. wholesale price for biodiesel was a little more than $3.30 a gallon. The Department of Energy said Aug. 4 that the average wholesale price of ultra-lowsulfur diesel was about $1.89 a gallon.

“Domestically in the U.S., around summer 2008, soaring feedstock costs jacked up the price of making biodiesel, especially the favored soy-based biodiesel. Some producers were unable to get feedstock,” Spencer Kelly, editor of OPIS’ Ethanol and Biodiesel Information, told TT.

“Depending on what period of time, quick-rising crude and diesel prices did help keep high-priced biodiesel competitive,” Kelly said, “but by and large, biodiesel has been uncompetitive with ULSD for some time, especially since crude prices fell last fall.” He estimated that U.S. production this year would amount to some 300 million gallons.

Whittington agreed: “People always ask me how high standard diesel has to go before biodiesel is competitive, but that’s the wrong question.

“The question is the spread between our feedstock costs and the cost of diesel,” he said. “We basically buy off feedstock costs and sell off diesel. Biodiesel needs to be extremely price competitive to be marketable.”

Whittington said that feedstock costs make up 85% to 90% of the cost of biodiesel, which he said was why biodiesel became uncompetitive when soy prices tripled last year.

“Soy prices have come down but not by much,” he added. “That’s why we’re going to convert this plant so that we can make biodiesel from all biomass, not only other agricultural crops, but also animal fats and waste grease.”

Kelly and Whittington said that Europe’s tariff also drastically affected the U.S. biodiesel market. In July, the European Commission said subsidies gave U.S. biodiesel an unfair advantage, and the commission extended to five years a stiff tariff that it had imposed temporarily in March.

A spokeswoman for the European Biodiesel Board told TT at the time that U.S. imports had grabbed 20% of the European market and fell to zero when the tariffs were instituted. She said that biodiesel exports to Europe constituted up to 80% of U.S. production.

“The European tariffs were almost a death blow to some biodiesel producers because it represented so much of their market over the last year,” Kelly said. “Basically, they were shipping B99 that was able to get the $1 per gallon U.S. blending credit [and] was eligible for European local subsidies as well.”

He added that when the European export market was lost, “the U.S. biodiesel industry was operating at somewhere between 25 to 30% of capacity by summer.”

Whittington agreed.

“We don’t sell directly to Europe but to some large blenders who may have,” he said. “Demand did drop after the tariffs were put on, and we even received material from the Europeans explaining why the tariffs were needed. I don’t blame them.”

An executive of another biodiesel refiner, who asked not to be identified, said that at least 50% of the U.S. production was going to Europe, which he said allowed refiners to become complacent and not focus on cutting costs.

But NBB’s Frohlich disagreed, saying that U.S. producers saw Europe only as a temporary outlet.

“I think the strongest point is that it was not the European tariffs that most affected the biodiesel market but the lack of a federal policy framework that was put into place in 2007 through the Energy Independence and Security Act but has yet to be implemented,” Frohlich said.

“Most of our producers were looking forward to 2009,” when an EPA mandate of 500 million gallons was set to go into effect, Frohlich said.

However, the biofuels mandate has been delayed, and the proposed EPA rule would remove soy-based biodiesel as an acceptable alternative fuel.

“Lack of a federal policy is the biggest challenge,” Frohlich said. “Once we reach that goal, we’ll see a significant growth in production, revenue and distribution in the biodiesel industry.”

Transport Topics, 8/24/2009

GDP Stabilizes in Most Major Economies
Thursday, 20 August 2009 00:00

Decline in 30-member OECD area stabilizes near zero.

Gross Domestic Product in the 30 member countries of the Organization for Economic Cooperation and Development stabilized during the second quarter of 2009, dropping by a mere 0.002 percent, following a fall of 2.1 percent in the previous quarter, the OECD said. In the "Major Seven" countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States), GDP fell marginally, by only 0.1 percent from the previous quarter.

However, there was a considerable variation among the Major Seven during the second quarter, ranging from a 0.9 percent increase in Japan, following two quarters of significant declines (minus 3.1 percent and minus 3.5 percent), to a 0.8 percent decline in the United Kingdom. Both France and Germany recorded positive growth of 0.3 percent during the second quarter compared with declines of 1.3 percent and 3.5 percent respectively in the first quarter.

In the United States, GDP fell by 0.3 percent, following a drop of 1.6 percent in the previous quarter.

GDP dropped by 0.1 percent following a decline of 2.5 percent in the euro area, comprised of the following 13 OECD member countries: Austria, Belgium, Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, Netherlands, Portugal, Slovak Republic and Spain, plus three that are not members of the OECD: Cyprus, Malta and Slovenia.

It dropped 0.3 percent in the European Union, following a decline of 2.4 percent in the previous quarter of 2009.

However, all of the Major Seven economies continued to register declines in GDP, on a year-on-year basis, compared with the second quarter in 2008. This ranged from minus 2.6 percent in France to minus 6.5 percent in Japan. For the OECD area, GDP fell 4.6 percent between the second quarter of 2008 and the second quarter of 2009.

The 30 OECD member countries are: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom and the United States.

Journal of Commerce, 8/20/2009

Importer Security Filing Gains Momentum
Wednesday, 19 August 2009 00:00

The US Customs and Border Protections Importer Security Filing (ISF) program is gaining significant momentum and quality, noted Log-Net, Inc., a provider of international logistics software and ISF filing services. Importers must provide details for the majority of their trading partners involved in the importation of goods to the United States before the goods leave the origin port. The new regulations are increasing the volume and velocity of data regarding the flow of goods thus creating process challenges for many importers, notes Log-Net.

The regulation is in a voluntary compliance period through 2009. Full compliance is required by January of 2010. Customs and Border Protection (CBP) has been continuously rolling out outreach programs and information system improvements related to the program, says Log-Net. CBP committed to respond to all electronic filings within two minutes of submission by an importer. Log-Net notes CBP has been keeping this commitment and continues to improve its performance. Some importers have been hesitant to comply with the importer filing requirements waiting for stronger momentum says Log-Net. Information is flowing well now, systems are very cost effective and the biggest challenge is now getting importers to update their business processes, the company comments. For the month of July, CBP's performance improved across the board. Log-Net says it experienced the following interface activity in the ISF program:

Average time for response: 1.76 minutes, down from 3.5 minutes in June.

Mean time for response: 1.80 minutes, same as June.

Fastest response: 11 seconds, down from 12 seconds in June.

Slowest response: 14.9 minutes, down from 3 hours in June

During the same period, CBP implemented a format upgrade which occurred precisely as posted with no unexpected impacts to any of Log-Net's client filings, the company said. This was a testimony to CBP working closely with industry engineering teams to minimize any impact to trade flows, said Log-Net. CBP also announced that they will be tightening the acceptable filing requirements and will reject filings that have been submitted with some previously accepted errors in their format or content.

Logistics Today, 8/19/2009

US trade gap widens in June on oil prices
Monday, 17 August 2009 00:00

The US trade deficit widened in June to $27.0 billion, as goods imports increased for the first time in 11 months on the back of higher oil prices, a Commerce Department report said.

Analysts surveyed before the report had expected the monthly trade gap to widen to around $28.5 billion. Stronger foreign demand for US goods and services offset some of the impact of the oil price increase on the deficit.

Both US exports and imports remained sharply below year-ago levels, before the global financial crisis began wreaking a savage toll on international trade.

The trade gap for the first six months of 2009 totaled nearly $173 billion, down more than 50% from the same period last year.

At the current pace, the US trade deficit for all of 2009 would be the lowest since $265 billion in 1999.

There was little if any market reaction to the data, even though the trade gap was narrower than expected.

"Unlike 1987, it's not the market-moving number it once was. Investors are trying to catch their breath from the run (in stock prices) we've seen over the past month and a half," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.

US imports of goods and services rose 2.3% in June to $152.8 billion, the highest since January. Higher oil prices accounted for much of the increase, and imports of consumer products fell to the lowest since November 2005.

Although the smaller trade deficit is positive for second-quarter economic growth, the drop in consumer goods imports suggests "the positive GDP impact of the report is masking the strain on the consumer and near-term growth potential," said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut.

The average price for imported oil rose for the fourth straight month to $59.17 per barrel, helping to widen the US trade gap with the Organization of Petroleum Exporting Countries to the highest since October 2008.

US exports rose 2.0% in June to $125.8 billion, led by stronger foreign demand for industrial supplies and materials and capital goods.

Exports of foods, feeds and beverages were the highest since October 2008.

The politically sensitive US trade gap with China widened to $18.43 billion, the largest with any single country. Imports from China were $23.98 billion in June, while US exports to that country totaled $5.55 billion.

Other data showed US mortgage applications fell last week, reflecting a drop in demand for home refinancing loans as interest rates soared to their highest levels since June.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Aug. 7 decreased 3.5%.

The report showed that while refinancings were down sharply, applications for loans to buy homes, which are less sensitive to interest rates than refinancings and are an early indicator of sales, rose slightly.

Still, the tepid interest in purchase loans does not bode well for the hard-hit US housing market, which has been showing signs of stabilization. (Reuters)

American Journal of Transportation, 8/17/2009

Senate Bill Would Restructure Customs
Monday, 17 August 2009 00:00

Leaders of the Senate Finance Committee want to change the focus of the federal Customs and Border Protection agency to stress efforts on trade enforcement and facilitation.

Chairman Max Baucus, D-Mont., and the ranking Republican, Sen. Charles Grassely, R-Iowa, filed the Customs Facilitation and Trade Enforcement Reauthorization Act of 2009 this month.

The bill would make a significant change in Customs’ senior management, and it would call the agency to account for its activities including the Automated Commercial Environment, Customs-Trade Partnership Against Terrorism, import safety and intellectual property rights. The bill also would require Customs to develop joint strategies with Immigration and Customs Enforcement.

Responsibilities for Customs’ trade and security functions would be divided between two executives. The bill would create a principal deputy commissioner in charge of trade facilititation and enforcement matters, revenue, public communication and human resources.

A deputy commissioner would be in charge of Customs’ security operations, security analysis and enforcement of non-trade laws.

The bill would change the name of the Office of International Trade to the Office of Trade.

The Commercial Operations Advisory Committee (COAC) would become the Customs Commercial Operations Advisory Committee (CCOAC), which would oversee ICE as well as Customs operations.

Customs would be obligated to work with CCOAC, and the Trade Support Network to develop new benefits for participants in C-TPAT. Customs also would be required to set up a voluntary “Customs Facilitation Partnership Program” to provide benefits to companies that enter merchandise.

The bill would authorize $300,000 for ICE in fiscal 2010, 2011 and 2012, but also require Customs to report to Congress how the advanced computer system will be completed by Sept. 30, 2012.

The bill also calls for an automated system for making drawback claims. Drawback refunds duties to importers who re-export goods. Marianne Rowden, president of the American Association of Exporters and Importers, said that improving drawback was one of the group’s highest priorities.

“We have worked out the principles for drawback modernization with CBP. We’ve had a deal with them for about five years,” Rowden said. Improvements in the system should encourage wider use of drawback, especially by medium- and small-sized companies. “We and the government have an interest in expanding the use of drawback, which has fallen in the past several years.”

Journal of Commerce, 8/17/2009

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