84 th International Propeller Club Convention Fundamental Changes to a Traditional Transportation Paradigm. October 7, 2009

Transcription

1 84 th International Propeller Club Convention Fundamental Changes to a Traditional Transportation Paradigm October 7, 2009

2 Today s Objectives Endeavor to provide a broad context for today s session by briefly touching on: Shippers Supply Chain Drivers The Asia-US Trades The Routing Options Some Market Realities But most importantly, finish on time! 1

3 Container vessels account for 27% of all Panama Canal transits in 2008 Panama Canal Vessel Transits by Market Segment: FY % 6% 2% 27% Container Dry Bulk 9% Refrigerated 16% 16% 18% Total: 13,147 Vessel Transits Tankers Others Vehicle Carriers General Cargo Passengers Source: ACP (Panama Canal Authority); Norbridge research and analysis 2

4 Supply Chain Trends Chinese Factory Local Truck - Guangdong Freight Forwarder CFS Container Terminal Yantian, China Chinese Factory B Local Dray to DC Rail Ramp Chicago Intermodal Train LA- Chicago Rail Ramp Long Beach Container Terminal Long Beach Distribution Center Truck to store Store Shelf 3

5 Norbridge Supply Chain Research Global Sourcing China will remain dominant global source for US imports Near-shoring may grow at the margin (exchange rates, fuel costs) Supply Chain Strategies Start with customer locations, then sources, then DCs, then flow routing Speed (high value product) and cost (low value) are key; also reliability Port Selection End-to-end supply chain cost and service considerations are key All else equal, shippers seek rapid cargo transit and low inland costs Shippers select port if they deconsolidate or transload on the coast Carriers and 3PLs make port selection otherwise (port-to-door routing) Transloading will wax & wane Compelling economics under many circumstances Equipment, inland service, rate differentials and capacity are key considerations 4

6 Asia-US Trade 5

7 Asian Import & Export Loads: By Coast Asia Import and Export Loads by Coast, % Import s Export s Coast Pacific Atlantic Gulf Total Imports Total Loads CAGR % , Import Loads -4.7% 1.0% 5.7% -3.2% 17.2M TEUs (2009) Change in TEUS, M 0.1M 0.04M -1.5M -0.1M Import s Export s 80% 100% 60% 80% 40% 60% 20% 40% 0% Import s 2.0 Exports Pacific 100% 80% 60% 40% Gulf Atlantic 20% 0% Import s Export s Note: different scale for the Gulf Import s Export s 20% 0% Import s Export s Source: PIERS data 2009, NBI Analysis Note (1): Pacific region includes traffic into Canada West Coast ports Note (2): Total Loads shown (excludes empties) 6

8 CAGR N. Far East China continues to dominate North American container trade. Size and Growth of North America Container Trade Regions ( ) 15% 10% China Indian Sub. SE Asia 5% C. America Caribbean N. Europe 0% Med % -10% Change (Millions of TEU) China N. Far East N. Europe SE Asia Med. C. America Caribbean Indian Sub. ECSA WCSA Note: Excludes AK, HI, Guam and Puerto Rico ports Note: Bubble size indicates 2008 TEU throughput Source: 2003 and 2008 PIERS data; Norbridge Analysis 7

9 Global Insight projects China will continue to drive U.S. container growth Size and Growth of US Container Trade Regions ( ) 7.0% CAGR 6.0% 5.0% 4.0% 3.0% 2.0% Indian Sub. China China 1.0% 0.0% Change (Millions of TEU) China N. Europe N. Far East C. America SE Asia Mediterannean Caribbean ECSA Indian Subcontinent ANZ Source: GI; Norbridge research and analysis Note: Bubble size indicates projected 2013 throughput 8

10 There are multiple options for Asia (China)-North American container trades Asia-Americas Routing Options China-WC Canada China-US PNW China-US PSW China-PC-US Gulf/Atlantic China-SUEZ-US Gulf/Atlantic 9

11 The maximum number of Asia-Suez services peaked in 2008 with three services. # Asia-Suez Services by Year: One-way Capacity (TEUs-000s) Deployed on Asia-Suez Services: Source: Compair Q Q

12 The western railroads have significant scale advantages Source: ALK 11

13 Intermodal business is an important source of revenue, volume, growth and profitability for the North American rail industry 2008 Railroad Revenues and Volumes , Revenue in $M, Volumes in Carloads Source: Company SEC Filings *CN and CP revenue figures are in CAN $ **KCS has not yet released full year 08 figures 12

14 Economics: Some Important Questions Will North American western railroads price themselves out of interior markets? Will management & the ILWU solve the West Coast productivity issue? What will the optimal size vessel be on the expanded Panama Canal route? If one transships, can one fill a 10,000+ TEU vessel and deliver competitive service vs. direct call all-water? 13

15 Some Market Realities Chinese Factory Local Truck - Guangdong Freight Forwarder CFS Container Terminal Yantian, China Chinese Factory B Local Dray to DC Rail Ramp Chicago Intermodal Train LA- Chicago Rail Ramp Long Beach Container Terminal Long Beach Distribution Center Truck to store Store Shelf 14

16 Some Market Realities The Players Services Big Ships Port Capacity Rail Capacity 15

17 There are a lot of players and options significant BCOs third party vendors 15 global shipping lines offering over 70 services per week Three basic routing options 10 major North American gateway ports Six railroads 16

18 Asia-West Coast services represented approximately 75% of Asia-North America services and capacity in Asia-North America Deployed Capacity* by Coastal Range (TEU-Thousands) Asia-North America Services by Coastal Range PSW PNW PSW/PNW PC-East Coast Suez-East Coast Gulf/East Coast 0 PSW PNW PSW/PNW PC-East Coast 2 1 Suez-East Coast Gulf/East Coast Source: Compair Q *Noted: Deployed capacity equal to sum of one-way capacity on all vessels deployed on the trade (all on weekly services) 17

19 Los Angles and Long Beach First Ports of Call on Asia-North America Services (# of Services) POLA/POLB Seattle/Tacoma NY/NJ Savannah Vancouver Oakland Others (3) Source: Compair Q

20 How big will the ships be? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 6,000 + TEU Newbuildings by Trade Lane: Percent of Total Number of Vessels (Dec Jan. 2010) 6,000-6,999 7,000-7,999 8,000-8,999 >9,000 Asia-Europe Asia-Europe/Med Asia-Med Asia-North America Asia-WCNA Other Note: Asia-Europe, Asia-Europe/Med, and Asia-Med Trade Lanes can also include stops in the Middle East and India Subcontinent Note: Other Trade Lane is a bucket of Trade Lanes that have less volume than some of the more well traveled ones. Source: Containerization International Magazine; Dec 2004 Jan

21 Big Ship Draft Requirements: Some Realities The eastbound trade is the driver The eastbound trade is a cube, not a weight trade The expanded Panama Canal will have a draft of 50 freshwater = about 14.5 meters or feet salt water Containerships burn 40-50% of their bunkers in route from Asia to the East Coast of North America Most large containerships traversing the Panama Canal will likely arrive at vessel drafts significantly less than 14.5 meters or 48 feet 20

22 Given 4.5% growth, the largest service vessel size scenario for the Asia-US NATL trade is estimated to be approximately 10,000 TEUs by Thousands of TEUs Optimal Ship Size to Support Asia-US-NATL Coast Traffic: % Growth Services 15 Services 20 Services 10 Note: US NATL represents ports from Jaxport to Boston Note: Asia includes SEA, NFE, and China Source: PIERS data; Norbridge Analysis 21

23 Given 6% growth, the largest service vessel size scenario for the Asia-US NATL trade is estimated to be approximately 12,000 TEUs by Optimal Ship Size to Support Asia-US-NATL Coast Traffic: % Growth 12 Thousands of TEUs Services 15 Services 20 Services Note: US NATL represents ports from Jaxport to Boston Note: Asia includes SEA, NFE, and China Source: PIERS data; Norbridge Analysis 22

24 Ample port capacity likely exists on both coasts. Estimated Number of Major Container Terminals Estimated Gross Terminal Acres at Major Container Terminals 25 7, , , ,000 3,000 6, ,000 4, , USWC USEC 0 USWC USEC Source: Compair Q *Noted: Deployed capacity equal to sum of one-way capacity on all vessels deployed on the trade (all on weekly services) 23

25 Significant expansion opportunities also exist USWC Pier 500 Middle Harbor LAXT conversion Tacoma: multiple developments Terminal 2 Deltaport Prince Rupert Phase II USEC Bayonne & Global Craney Island Navy Base Jasper County Hanjin Jacksonville 24

26 The Potential Opportunities The no-brainers Mid-Atlantic Southeast The battlegrounds Ohio Valley Atlanta Texas Memphis Chicago 25

27 84 th International Propeller Club Convention Fundamental Changes to a Traditional Transportation Paradigm October 7, 2009