United States: Amtrak cancels all long distance trains

Amtrak will cancel all long-distance trains beginning on Thursday to avoid disruptions in advance of a potential rail worker strike later this week.

An Amtrak spokesperson said the changes will ensure trains can reach their destinations before the strike, which could begin as early as Friday, and the adjustments could soon extend to other routes.

Amtrak is not involved in the contract negotiations between rail workers and freight companies, but many of its trains run on railroads owned by third parties that would shut down if a strike takes place.

“While we are hopeful that parties will reach a resolution, Amtrak has now begun phased adjustments to our service in preparation for a possible freight rail service interruption later this week,” the spokesperson said. “Such an interruption could significantly impact intercity passenger rail service.”

More than 115,000 rail workers are legally allowed to strike as of Friday, a deadline that has attracted a great deal of attention in Washington as lawmakers fear price gains and supply chain bottlenecks from the potential shutdown, which would add to already high inflation rates.

The new suspensions, which begin on Thursday, include Amtrak’s Auto Train service, which runs between Lorton, Va. and Sanford, Fla., and its Capitol Limited service, which runs between Washington, D.C., and Chicago.

Amtrak said it will also suspend its Cardinal service, which runs between New York City and Chicago, and its Palmetto service between D.C. and Savannah, Ga. 

Palmetto trains north of D.C., which use Amtrak’s Northeast Corridor, have not been suspended. 

Amtrak owns that rail line, which runs between Boston and D.C., so the company says “only a small number” of departures on the line as well as branches to Albany, N.Y., Harrisburg, Pa., and Springfield, Ma., will be affected.

The rail service said it will offer customers the ability to either change their travel to another date or receive a full refund.

Amtrak began suspending some of its longest routes on Tuesday and has since added additional cancellations, with 14 total routes now suspended as of Thursday.

The International Association of Machinists and Aerospace Workers (IAM) on Wednesday became the first union to authorize a strike, with its nearly 5,000 workers rejecting a contract based on a White House-appointed board’s recommendations last month.

The contract proposal would implement 24% raises and back pay, but workers are demanding more predictable scheduling and the ability to take time off for doctor appointments without being penalized.

Fearing the potential economic fallout of a walkout, lawmakers are preparing to use congressional authority to block a strike. 

Some GOP senators have backed a bill that would approve the proposed contract, which is supported by railroads and business interests, and Democratic leaders have suggested they will intervene if no agreement is reached.

“All parties need to stay at the table, bargain in good faith to resolve outstanding issues, and come to an agreement,” White House press secretary Karine Jean-Pierre said on Wednesday.

“A shutdown of our freight rail system is an unacceptable outcome for our economy and the American people, and all parties must work to avoid just that.”

 

United States: IAM first to authorize strike

Nearly 5,000 railway workers at the International Association of Machinists and Aerospace Workers (IAM) voted to reject a tentative contract agreement with railroads and authorize a strike, the union said Wednesday.

IAM members are the first to approve a strike and reject a contract based on recommendations released by a White House-appointed board last month. 

The vote reveals that rail workers are not satisfied with the agreement, which calls for 24% raises and back pay but doesn’t address workers’ demands for more predictable scheduling and the ability to take time off for doctors’ appointments without being penalized. 

IAM said that it would delay strike action until September 29 at noon to allow union leaders to continue negotiations with railroads.

“We look forward to continuing that vital work with a fair contract that ensures our members and their families are treated with the respect they deserve for keeping America’s goods and resources moving through the pandemic,” IAM said in a statement.

More than 115,000 rail workers are legally allowed to strike as of Friday, a move that would shut down the transport of food, fuel and other goods, likely damaging the nation’s strained supply chains and driving up prices.

Lawmakers are preparing to use their authority to block a walkout. GOP senators are backing a bill that would enact a new contract based on the presidential board’s recommendations — the option railroads and other business interests are lobbying for — while Democratic leaders say they will intervene if necessary.

The White House, meanwhile, is discussing contingency plans to assure that key goods still make it to their destinations if railroads shut down. 

“We are working with other modes of transportation, including shippers and truckers, air freight, to see how they can step in and keep goods moving in case of this rail shutdown,” White House press secretary Karine Jean-Pierre told reporters Tuesday. 

 

Emerging massive stimulus for oil tankers

Tankers generally, but VLCCs in particular, will benefit spectacularly as Europe’s energy trades transform and the ban on Russian crude oil imports comes into effect in December 2022.

According to New York broker, Poten & Partners, the ton-mile demand generated by European imports rose by 32% as a result of reducing Russian imports to 2.0 million barrels per day (bpd) from 2.5 million bpd.

“Finding alternative sources of supply for another 2.0 million bpd will provide another massive stimulus to ton-mile demand and tanker rates,” the broker declared.

Over the five-year period from January 2017 to January 2022, Europe imported at an average of 2.7 million bpd of Russian crude oil by sea, 26% of the seaborne total but only 14% in terms of ton-miles.

Most of the oil imported into Europe was carried on smaller tankers running short-haul trades across the Baltic and Black Seas. Between March and August, however, crude oil imported by sea from Russia fell to 19% and, in ton-mile terms, shed two percentage points to 12%.

Since the start of the war, Europe has pivoted away from Russian crude, replacing supplies with imports from the US Gulf, South America (Brazil, Guyana), West Africa, and the Middle East. Imports from the US Gulf have doubled from 6% to 12%. This has led to a significant increase in ton-mile demand, and is a welcome shot in the arm for the recently weak large tanker sector.

The broker also noted that Russia will look for other customers for its displaced two million barrels of crude, most likely in Asia, China and India in particular. This will provide a further boost for ton-mile demand. “The tanker market is in for a wild ride,” Poten predicted.

MOL orders first VLCC

Dalian Cosco KHI Ship Engineering has announced a contract to build two dual-fuel VLCCs for Mitsui O.S.K Lines (MOL).

This is the first LNG-fueled VLCC ordered from a Japanese tanker operator, and the first VLCC newbuild order from global market since July last year, said Dalian Cosco KHI Ship Engineering. 

According to brokers Poten & Partners in a recent report the last VLCC newbuilding was ordered in June 2021, while there have been no contracts for Suezmaxes since July last year. Tanker markets have endured a torrid couple of years which has seen owners refrain from ordering new tonnage.

This VLCC pair for MOL, measuring 339.5 metres in length and 60 metres breadth, meeting the Phase 3 regulation of EEDI, will be able to reduce 25-30% carbon emission as compared to the traditional vessel. 

The newbuild VLCCs are scheduled for delivery from 2025 through 2026.

World must adapt Russian sanctions new norm

According to Seatrade Maritime News, the joint statement by the G-7 Finance Ministers for the month of September confirmed as much when they said, “We underscore our shared commitment to our determined and coordinated sanctions imposed in response to Russia’s war of aggression.”

Russia now faces the highest number of sanctions in the world. The figure stood at 5,581 in March, some way ahead of Iran and Syria. By August 7,750 individuals faced sanctions along with 1,452 entities, 91 vessels and six aircraft.

Even if a ceasefire in the current Ukraine war were agreed tomorrow, the sanctions would continue since it would take so long for Russia to be accepted as a normal trading partner by the G7 countries and their allies.

The important point is that everyone engaged in international trade must accept the semi-permanence of anti-Russian sanctions and ensure they take every step possible to adhere to them. Carriers, forwarders, charterers, insurers, importers and exporters and port authorities, all need to know who they are dealing with more than ever and be fully alert to the possibility of Russian proxies masquerading as legitimate entities.  

From now on, due diligence means screening all vessels and trade transactions to pick up suspicious activity by shell companies or front organizations that link back to Russia, which is capable of highly sophisticated workarounds when it comes to sanctions?

While Iran has been increasingly cunning in side-stepping sanctions, Russia is a larger economy with many more established contacts beyond its vast borders. For all organizations engaging in trade, monitoring for sanctions or trade-based money laundering is more of a necessity than ever.

In Britain, the urgency for organizations to screen and monitor for illegal Russian trading activity has increased with the introduction by OFSI (The Office of Financial Sanctions Management) of a strict liability test for sanctions breach investigations.

But around the world, more countries are taking different aspects of sanctions seriously, especially in relation to cargo-carrying vessels.

In Asia it was the Monetary Authority of Singapore that took the strongest line on such matters.

In April, in a sign that times are changing, the Central Bank of Bangladesh mandated the country’s banks to implement vessel-tracking to cut down on money laundering.

All legitimate organizations involved in trade need to increase the scope of routine and ongoing activity such as KYC and TBML monitoring and screening. They must have the ability to spot the indicators of illicit Russian activity or illegal trade with “Russian owned or affiliated” entities.

There are several areas that need close attention, which include:

Complex or changed ownership structures in companies supplying vessels for transactions: While there are often valid reasons for complex ownership, organizations need to watch out for shell companies, and questions of registration, domicile and control. This is more than simply looking at public details. Technology drawing on many sources can now see more deeply into ownership structures, which is an important first step.

Histories: Organizations need to avoid use of vessels or carriers with records of infringement or “going dark” by switching off AIS beacons, or which have a history of visits to areas or ports known for sanctions-flouting. Switches to flags of convenience or sudden changes of ownership should be warning lights in the current climate.   

Obscure supply chains: It is important to know which banks are financing transactions and who the parties and beneficiaries are. In the physical supply chain, anyone financing or participating in a transaction needs to know where the goods or commodities are coming from and where they are going. Just looking at vessels listed is not enough.

Vessel monitoring: Organizations need the end-to-end visibility to see ports of origin and ports of loading in any transaction. But they also must track vessels carrying the cargo across the oceans and be aware when they linger in areas known for illegal ship-to-ship transfers, or visit ports recognized as high-risk for sanctions flouting. Having the technology to check certificates of origin, bills of lading, consignees and so forth is vital, especially for banks financing or facilitating thousands of trade deals and shipments every day.

Vague drafting of sanctions: Knowing who or what is “Russian-owned and affiliated” can be difficult to nail down. It is understandable that port authorities, for example, do not want to make wrong moves that prove to be costly, such as impounding vessels where lawyers can make a strong case for legitimacy, or where ownership and responsibility are difficult to establish. Many ports lack sufficient screening technology, which is a deficit they need to address.

With thousands of transactions underway at any moment, the burden of ensuring continuing compliance with a mounting body of sanctions is immense.

Success will only be achievable through technology that can pull in all the relevant data at scale and analyses it in near-real time as part of an integrated monitoring and compliance solution.

Many financial organizations, for example, already have compliance technology into which they could integrate advanced sanctions-screening solutions.

Sanctions are unlikely to become any less complex and those against Russia are here to stay for years. For any organization participating in cross-border trade, it is surely worth avoiding any failure in screening or monitoring that could result in hefty fines and significant long-term reputational damage.

 

Governments urged to phase out fossil fuel

The Investors managing US$39 trillion have called on governments around the world to raise their climate ambition; including setting plans to phase out fossil fuel use and forcing companies to set out science-based transition plans.

The move by some - but not all - top fund firms comes ahead of the next round of global climate talks in Egypt in November this year.

This year's letter is the most ambitious appeal to officials yet, backers of the effort said, with additional requests for action on tackling methane pollution and scaling up finance to poorer countries.

Organized by the Investor Agenda, a group of investor-focused groups that count many of the world's largest fund managers as members, the 2022 Global Investor Statement to Governments on the Climate Crisis was the 13th one to be issued.

Investors are taking action as it is not only permitted by law but is in many cases required to ensure their ability to generate returns in the long-term as a core fiduciary duty and benefit from the opportunities associated with the shift to a net-zero emissions economy.

Other requests by the investors included scaling up low-carbon energy systems; implementing carbon pricing mechanisms that rise over time; establishing new or more ambitious plans to end deforestation.

In all, 532 investors signed the latest iteration including UBS Asset Management, Amundi SA and Federated Hermes.

However, none of the top three US index fund managers BlackRock, Vanguard and State Street Corp signed onto this letter.

The reticence comes as the process of investing with an eye on environmental, social and governance-related issues, or ESG, faces growing pressure in the United States.

Iran-Pakistan explore ways to expand trade

In a meeting between Consulate General of Iran in Karachi Hassan Nourian and Head of Tehran Chamber of Commerce, Industries, Mines and Agriculture (TCCIMA) Masoud Khansari, the officials discussed ways of expanding trade relations between Iran and Pakistan.

In this meeting, which was held at the place of TCCIMA on Monday, important issues such as the unfamiliarity of the businessmen of the two countries with the production capabilities, goods and services of each other, the existence of some communication and commercial monopolies, the decrease in the number of business delegation exchanges due to the pandemic, and the need for cooperation in holding exhibitions as well as more attention to border crossings were raised and discussed.

Referring to the volume of trade between Iran and Pakistan, Nourian said, “Informal trade between the two countries is large, and many Iranian products are traded in the Pakistani market using national currencies; trade through third countries and even smuggling also takes place, and it is estimated that the actual trade between the two countries is much higher than what is recorded in the official statistics.”

“For a long time, establishing a barter trade mechanism between the two countries has been discussed for developing mutual trade, and in this regard, a memorandum of understanding has also been signed between Zahedan Chamber of Commerce and Quetta Chamber of Commerce and Industry, but nothing special has happened in terms of implementation, and it seems that more focus and effort should be put on this issue,” the official added.

Referring to the holding of an exhibition in Karachi in late December, Nourian called on the Iranian chambers of commerce to make the necessary arrangements for the maximum presence of Iranian companies in this event.

Khansari for his part stated that TCCIMA will take the necessary measures to ensure the presence of private sector companies in the Karachi exhibition.

He further noted that TCCIMA is going to send an official invitation to Karachi Chamber of Commerce to send a business delegation to Tehran.

US Rail Strike Poses Economic and Political Risks for President Joe Biden

This week is shaping up to be a pivotal one for companies in the United States that rely on trains for transporting commodities, components and finished products.

Railroads and labor unions worked through the weekend to avoid a strike that could cost the world’s largest economy more than US$2 billion a day. Few signs of progress emerged, and the companies are advising customers of the likely service disruptions ahead of a potential walkout later this week.

On Sunday, Norfolk Southern said in an online notice that it “has begun enacting its contingency plans for a controlled shutdown of our network at 00:01 on Friday, September 16.” Union Pacific and CSX also announced contingency planning for a possible strike. BNSF urged its customers to call members of Congress to prevent any interruptions.

According to Bloomberg Intelligence analyst Lee Klaskow, BNSF and Union Pacific combine for 45% of Class I intermodal traffic. CSX and Norfolk Southern have 31%.

Trains accounted for about 28% of total US freight movements, according to government data for 2020, making it the busiest mode after trucks. Half of that traffic moves bulk commodities — particularly food, energy, chemicals, metals and wood products — as well as automobiles and industrial parts. The other 50% consists mostly of shipping containers carrying smaller consumer goods.

Strike or no strike, the nation’s freight-rail system is still dealing with imbalances. Earlier this month, for instance, the shipping line Maersk said it was suspending import bookings through Fort Worth, Texas, citing “severe congestion” around rail ramps and container yards in the region.

It’s not an isolated situation. The interlinked system that’s the lifeblood of the American economy is still recovering from the worst disruptions of the pandemic, and trains are a vital link in that chain.

Below are a few charts to help illustrate where the supply-chain snarls remain a challenge on the rails. The first one shows data from Hapag-Lloyd, Germany’s largest container-shipping line. The company reports dwell times for its intermodal boxes are staying steady or rising at key import and export junctures from Los Angeles to Savannah, Georgia.

Among the more prominent logjams continues to slow cargo movement around the twin ports of Los Angeles and Long Beach, California. There, nearly 80% of shipping containers are waiting more than five days on average to make their rail connections — a big jump from the beginning of the year, according to data from the Pacific Merchant Shipping Association.

Texas has the most miles of railroad tracks of any state but Illinois — and Chicago, in particular — has been the most important hub of US intermodal commerce for more than a century. According to the Association of American Railroads, 25% of all US freight rail traffic and 46% of all intermodal traffic starts and stops or passes through the Chicago region.

While 10 of 12 railroad workers’ unions have struck new labor deals, the two holdouts — the Brotherhood of Locomotive Engineers and Trainmen and the International Association of Sheet Metal Air, Rail, and Transportation Workers — account for more than 90,000 rail employees.

Their joint statement on Sunday didn’t hold back, accusing the railroads of scare tactics in the negotiating process that amounted to “corporate terrorism.”

The timing isn’t good for the trains to stop running. Harvest season across the farm belt is approaching, retailers are stocking up for the year-end holidays, and the economy already faces a stretch of weaker growth and high inflation.

The most immediate concern in the event of a rail strike would be for perishable goods. The American Bakers’ Association said, “Even a temporary interruption would create a devastating ripple effect that would create a shortage of materials and ingredients.