Vision and Collaboration A Northern Australian Perspective. Developing and growing regional logistics infrastructure to support regional demands

Transcription

1 Vision and Collaboration A Northern Australian Perspective Developing and growing regional logistics infrastructure to support regional demands

2 Let s test the hypothesis: It makes sense to ship directly into and out of Townsville for Northern Australian markets

3 Introducing Townsville and Northern Australia Overview of the logic and cost model Drawing Conclusions and summary Expanded into Case Study comparisons

4 DEVELOPING NORTHERN AUSTRALIA 55%/$96bn AUSTRALIA S EXPORTS 3 MILLION SQUARE KILOMETERS $ 5 BILLION AGRICULTURE PRODUCTION 1 MILLION PEOPLE (5% OF AUSTRALIA) Australian Government White Paper will set out policy platform for realising the full economic potential of Northern Australia with implementation plan over 2, 5, 10 and 20 years.

5 Northern Australia is the focus in terms of development (mining & agriculture) for Australia Townsville is the largest city in Northern Australia & forecast to be the fastest growing city, with major mining and agricultural projects developing around it.

6 TOWNSVILLE Northern Australia s largest city Largest city in Northern Australia Largest Defence Base in Australia Home to James Cook University Gateway to major mining & agricultural centres Access to the Great Barrier Reef Highest Population growth in QLD Average age is below 35 years Most diverse regional economy Townsville is recognised as one of Australia s most stable & diverse regional economics and is forecast to become Australia s 12 th largest city by 2025

7 Excellent Rail & Road Connectivity into Northern Australia Future Gulf Agricultural Hub Queensland Beef Production Access to 6 million head of cattle >1mtpa - Australia s largest sugar exporter 58 operating mines 411 mine sites Largest coal deposit in the world Burdekin Agricultural Hub

8 Townsville Shanghai 10 days sailing Townsville Shanghai 10 hours flight Global shifts, particularly in Asia, will drive changes to our import and export opportunities. Population Southeast Asian + Oceania 650,000,000 Population China 1.4 Billion Today, around 600 million people in Asia are middle class. This will burgeon to around 3 billion over the next 20 years. During FY14, 73% of trade via the Port of Townsville was with Asian markets and the proportion of trade with Asia is increasing.

9 PORT OF TOWNSVILLE

10 Relevance: strategic location / logistics Ideal location a hub for major population centres in northern, central and southern Queensland, as well as strategically placed close to Asian markets; Plans for the development of two additional general cargo berths to secure longterm general cargo capacity for north Queensland; Port Access Road (triple road train approved) allows direct road connections to cities and towns throughout regional Queensland for fast and cost effective delivery; Minimal road traffic congestion and restrictions compared to capital city ports enabling products to move faster and in. a more cost efficient manner to freight forwarders and retail outlets; Less weather and tide restricted than other regional ports; Storage and laydown areas available within, and in close proximity to Port, to facilitate long-term service and supply facilities; Diverse range of logistic service providers such as stevedores, transport companies, warehouse specialists and trade professionals available; Regular shipping, rail and road services.

11 CARS CATTLE & MEAT 30 + KEY COMMODITIES CONTAINERS FUEL & GAS SUGAR & FOOD METALS & MINING

12 Mining & resources hub for Northern Australia 57% Trade Volume 5.6 Million Tonnes, Growth up to 9.5 Million Tonnes in 5 years.

13 Agriculture Hub for Northern Australia 23% Trade Volume 2.6 Million Tonnes, Growth up to 4.8 Million Tonnes in 5 years.

14 Fuel Hub for Northern Australia 11% Trade Volume 1.1 Million Tonnes, Growth up to 1.8 Million Tonnes in 5 years.

15 General Cargo Hub for Northern Australia 9% Trade Volume 0.5 Million Tonnes, Growth up to 1.5 Million Tonnes in 5 years. 700,000 People, Growing to 1 Million in Catchment Area

16 Recent Investment = Growth More than $500 million has been invested over the last five years to increase port and transport links to provide capacity and efficiency to support growth. The $230 million Townsville Port Access Road provides a dedicated heavy vehicle access to the port creating efficiencies and cost savings for freight movements and removing traffic from urban areas. Partnership with all levels of government and defence to deliver the state of the art $85 million Wharf 10 and Quayside Terminal, a flexible multi-purpose facility for cruise, defence, vehicles, cattle and general cargo. Partnership with Glencore in a jointly funded $85 million upgrade of Berth 8 has created an efficient minerals and fertiliser export facility increasing capacity by around 2 million tonnes per annum.

17 The Logic and Cost model

18 Why should you consider this? Freight & time cost savings Reliability & continuity Greenhouse gas reductions

19 Existing Supply Chain Routes and Costs Brisbane is the largest Container Port in Queensland: 1 300km south of Townsville Additional sailing from Asia to Brisbane vs Townsville: + 2 Days Townsville Brisbane Road & Rail transport from Brisbane to Townsville: + 2 Days + transport costs AU +$1,500 (rail) or +$2,500 (road)

20 Northern Australia Benefits to the Consumer Direct Imports will: improve the viability of shipping services and reducing freight rates reduce the costs of products in the Northern region get products faster to consumers reduce the costs of inputs to a whole range of industries & thereby increase the competitiveness of manufacturing & construction have significant positive multiplier effects on the local & regional economy increase efficiencies & potential demand reduce environmental impacts

21 Direct International Shipping: Bring the costs of living & doing business in North QLD down. - $250 - $100 - $3000

22 Total Volumes - How many origins Key Considerations The inventory planning challenge: Push vs Pull - Overhead to hold inventory Understanding your customers: - Where are they, what do they need?

23 Overall volumes to region are key Markets evenly distributed by population? If so, 3.5% of population = 3.5% of volume Total annual volume is then split into monthly or fortnightly requirements There will be a trade off point where the savings in freight are outweighed by the increasing costs of holding the stock

24 Volumes are Origin specific If single origin volumes are based on demographic split If multi origin must be load port specific Multi-vendors single port, may consolidate in a CFS centre (Container Freight Station) The more origins, the more difficult to consolidate

25 Inventory holding The inventory stocking policy and process for stock flow planning is a pivotal consideration It is too costly to hold stock in multiple locations - There is a trade off between response time and inventory holding - Inventory carrying costs can be significant with duplication There is no one right answer, but - Stock replenishment at item level by sea is difficult due to lead times - Known requirements may be planned in advance - Need to plan buying by origin and destination, at least 4 6 weeks in advance - Specific to origin and destination pairs Thus - Push demand, not Pull

26 Promotional / one off lines For example: Back to school Christmas / Easter Father s day / Mother s day, other seasonal shopping events Wet season stock up, etc. Planned well in advance Known push volumes by destination Can be consolidated & packed customer ready at origin Initial drop effective - replenishments can be from central facility

27 Where are you customers? Townsville as unload port then consider costs of further distribution to other cities in Qld? Population: 605,000 Central QLD: 250K Northern QLD : 300K Central West QLD: 15K North West QLD: 40K

28 Seasonality/ Demand differences Demographics influence on demand Air conditioners (Not Heaters!) Pool salt Outdoor furniture / living equipment Counter seasonal demand (Wet vs Dry) Agricultural inputs different from Southern

29 Case Studies: These are all Hypothetical cases to illustrate the opportunities.

30 Case A : A homewares & furniture importer and national distributor Total imports of 5,500 TEU 150 stores around Australia All products are Push, very limited replenishment from single national warehouse Origins are mainly Shenzhen (40%) & Shanghai (50%), from 6 key vendors 200 TEU will ultimately be sold in North QLD: - 80 from Shenzhen / 100 from Shanghai Assumptions - 2 equal vendors ex Shenzhen 40 TEU pa each - Equals 3.5 TEU p/m - 4 vendors ex Shanghai from TEU pa - From 2 to 3 TEU p/m Opportunity to consolidate vendors to gain shipping efficiencies in Container Freight Station Valid Opportunity: Estimated saving of $900K

31 Case A: Cost Savings TOWNSVILLE COST COMPARISON SHIPPING CHARGES PORT CHARGES TOWNSVILLE (TSV) Port of Origin BRISBANE (BNE) SHANGHAI SHIPPING Container Volume SHIPPING Carrier $ 142,308 Qty 20 20'GP Carrier $ 75,641 BAF $ 23,481 Qty 20 40'GP BAF $ 12,481 Shipping Charges $ 165,788 Qty 60 40'HC Shipping Charges $ 88,122 Port of TOWNSVILLE Port of BRISBANE Port Charges $ 56,825 Port Charges $ 42,245 Wharf Cartage $ 37,720 Wharf Cartage $ 37,720 TOTAL $ 94,545 TOTAL $ 79,965 Seafreight: - ve Port costs: - /= Final Destinations via ROAD ex TSV Final Destinations via RAIL ex BNE Final Destinations via ROAD ex BNE Unpack Charges $ 82,850 Unpack Charges $ 82,850 Unpack Charges $ 82,850 LAND FREIGHT CHARGES TOTAL CHARGES TO DESTINATION Townsville $ 27,500 Townsville $ 363,000 Townsville $ 423,500 Cairns $ 51,600 Cairns $ 322,500 Cairns $ 361,200 Mackay $ 59,200 Mackay $ 199,800 Mackay $ 259,000 Fuel Surcharge 15% $ 20,745 Fuel Surcharge 15% $ 132,795 Fuel Surcharge 15% $ 156,555 Freight Charges $ 159,045 Rail Freight Charges $ 1,018,095 Freight Charges $ 1,200,255 $ 241,895 $ 1,100,945 $ 1,283,105 COMPARISON OF CHARGES Dest via ROAD ex TSV Dest via RAIL ex BNE Dest via ROAD ex BNE $ $ $ 502,228 1,269,032 1,451,192 Net Savings = $900K Land Freight: + ve

32 Case B : Industrial after market parts distributor Presumes 1,500 TEU PA 120 branches around Australia All product distributed on replenishment basis. Very wide SKU range Sourced from 15 countries, with 500 TEU from Asia, from 8 different ports 75 TEU ultimately sold in North Qld - 25 TEU from Asia - 8 Ports so 3 TEU pa from each port (if evenly split) - 1 TEU every 4 months Products are replenished so sourced via main warehouse for East Coast Not a feasible opportunity to ship through Townsville

33 Case C: Air Conditioner Sales & Distribution company Presumes 4000 TEU PA Sells to multiple retailers around Australia outlets Products distributed 50% push & 50% replenishment basis. Narrow SKU range Sourced 95% from one OEM vendor out of port of Yantian High seasonal bias 150 TEU ultimately sold in North Qld - Most from one port Yantian - 50% on push basis - 75 TEU pa. - 5 to 10 TEU per month (likely some seasonal bias) Clear Opportunity Estimated saving: $230K

34 Case C: Cost Savings TOWNSVILLE COST COMPARISON TOWNSVILLE (TSV) Port of Origin BRISBANE (BNE) SHENZHEN SHIPPING CHARGES SHIPPING Container Volume SHIPPING Carrier $ 67,308 Qty 5 20'GP Carrier $ 43,269 BAF $ 11,106 Qty 40'GP BAF $ 7,139 Shipping Charges $ 78,413 Qty 35 40'HC Shipping Charges $ 50,409 Seafreight: - ve PORT CHARGES Port of TOWNSVILLE Port of BRISBANE Port Charges $ 23,165 Port Charges $ 16,913 Wharf Cartage $ 15,295 Wharf Cartage $ 15,295 TOTAL $ 38,460 TOTAL $ 32,208 Port costs: - /= Final Destinations via ROAD ex TSV Final Destinations via RAIL ex BNE Final Destinations via ROAD ex BNE Unpack Charges $ 31,910 Unpack Charges $ 31,910 Unpack Charges $ 31,910 LAND FREIGHT CHARGES TOTAL CHARGES TO DESTINATION Townsville $ 8,208 Townsville $ 108,350 Townsville $ 126,408 Cairns $ 12,700 Cairns $ 79,375 Cairns $ 88,900 Mackay $ 12,267 Mackay $ 41,400 Mackay $ 53,667 Fuel Surcharge 15% $ 4,976 Fuel Surcharge 15% $ 34,369 Fuel Surcharge 15% $ 40,346 Freight Charges $ 38,151 Rail Freight Charges $ 263,494 Freight Charges $ 309,321 $ 70,061 $ 295,404 $ 341,231 COMPARISON OF CHARGES Dest via ROAD ex TSV Dest via RAIL ex BNE Dest via ROAD ex BNE $ $ $ 186, , ,848 Net Savings = $230K Land Freight: + ve

35 Case D : White Goods Importer and Distribution Presumes 12,000 TEU PA Sells to multiple retailers around Australia outlets Products distributed 60% push & 40% replenishment basis. Moderate SKU range, rapidly evolving Sourced 95% from one OEM vendor out of Thailand 400 TEU ultimately sold in North Qld - Most from Single origin in SE Asia - 60% on push basis TEU pa - 20 TEU p/m Excellent Opportunity Estimated saving: between $800K - $1,400K

36 Case D: Cost Savings TOWNSVILLE COST COMPARISON TOWNSVILLE (TSV) Port of Origin BRISBANE (BNE) SHENZHEN SHIPPING CHARGES SHIPPING Container Volume SHIPPING Carrier $ 153,846 Qty 20'GP Carrier $ 83,333 BAF $ 25,385 Qty 'GP BAF $ 13,750 Shipping Charges $ 179,231 Qty 40'HC Shipping Charges $ 97,083 Seafreight: - ve PORT CHARGES Port of TOWNSVILLE Port of BRISBANE Port Charges $ 59,725 Port Charges $ 42,345 Wharf Cartage $ 39,100 Wharf Cartage $ 39,100 TOTAL $ 98,825 TOTAL $ 81,445 Port costs: - /= Final Destinations via ROAD ex TSV Final Destinations via RAIL ex BNE Final Destinations via ROAD ex BNE Unpack Charges $ 84,000 Unpack Charges $ 84,000 Unpack Charges $ 84,000 LAND FREIGHT CHARGES Townsville $ 41,667 Townsville $ 550,000 Townsville $ 641,667 Cairns $ 100,000 Cairns $ 625,000 Cairns $ 700,000 Mackay $ 133,333 Mackay $ 450,000 Mackay $ 583,333 Fuel Surcharge 15% $ 41,250 Fuel Surcharge 15% $ 243,750 Fuel Surcharge 15% $ 288,750 Freight Charges $ 316,250 Rail Freight Charges $ 1,868,750 Freight Charges $ 2,213,750 $ 400,250 $ 1,952,750 $ 2,297,750 Land Freight: very + ve TOTAL CHARGES TO DESTINATION COMPARISON OF CHARGES Dest via ROAD ex TSV Dest via RAIL ex BNE Dest via ROAD ex BNE $ $ $ 678,306 2,131,278 2,476,278 Net Savings = $ >1M?

37 Further South or West? Depends on container load planning & consolidation options Mt Isa / Longreach Rockhampton? Darwin? Backhaul freight rates: Can be significantly cheaper In some cases, can be worth

38 CO2 Emissions? The choice of the means of transportation does severely influence the amount of CO2 emitted for the transportation of goods. Townsville to Brisbane = 1,355 km 140 trucks travelling /week from TVS to BRI. Number of km travelled/truck/year = 70,460 km How much CO2 saved by shipping via Townsville? 1.5 tonnes per TEU Air plane (air cargo), average Cargo B747 Modern truck Modern train Modern ship (sea freight) 500 g 60 to 150 g 30 to 100 g 10 to 40 g The amount of CO2 (in grams) emitted per metric ton of freight and per km of transportation:

39 Continuity of supply Region is subject to significant weather events that can seriously compromise supply and distribution

40 Northern Australia Impact of Weather Every year along the Bruce Highway, due to flooding 9 locations are closed for more than 48 hours 6 locations are closed for more than 5 days Up to 33 sites are routinely cut-off At Rockhampton alone, critical supplies to and from Central/Northern Queensland can be stalled for 2-3 weeks at a time isolating over 700,000 Queenslanders The January 2011 floods cost the Queensland economy $45.7 million Traffic volumes on the Bruce Highway are expected to grow by more than 3% per year to 2025 further exacerbating delays

41 Northern Australia Impact of Weather

42 Northern Australia Impact of Weather

43 Northern Australia Impact of Weather

44 Northern Australia Impact of Weather

45 To mitigate supply risks Shipping through Townsville and developing the logistics support, creates an additional route into Northern Australia that may be used when the roads are unusable. This provides reliability and continuity.

46 So does this apply to you? The key factors that support North Queensland direct shipping Strategy

47 Favourable factors: High Volume all year - or High volume peak season Demographically focussed Single origin or consolidated High Inventory Volume to Value ratio Promotional or one off shipments Justification rationale Stock holdings required locally to maintain high service levels e.g. in weather events

48 Justification rationale Unfavourable Higher Value (Inventory carrying costs) Low volumes High SKU ranges Replenished lines

49 Summary: Outlook What does the future look like?

50 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36 FY37 FY38 FY39 FY40 FY41 FY42 FY43 FY44 Tonnes (Millions) Planning for Growth Trade Outlook Low Growth Medium Growth High Growth Historical Actual

51 $2 BN Port & Industrial Park Expansion 48 MTPA by 2040 under High Growth HA Industrial Park Free Trade Zone 7 Berths in outer harbour

52 4,900 HECTARES $250M DIRECT RAIL LINK 1.4KM LENGTH TRAINS INDUSTRIAL LAND PRECINCT & RAIL LINK

53 Questions and Answers