Market & Industry Trends: Impacts on Latin American and ......Modest impact on exporters of durable goods, e.g. Brazil Modest slowdown for some nondurable exporting countries, e.g

Market & Industry Trends:

Impacts on Latin American and Caribbean Ports

Scudder SmithPrincipal ConsultantParsons Brinckerhoff

AAPA SeminarFebruary 4, 2009

Discussion Topics

� The Global Economy is in Serious Decline

� Panama Canal Expansion Has Begun(third set of locks)

� A New US President has Taken Office with the Promise of Hope and Change

� Messages:

� The World is Tightly Connected

� Everything May Not Be As It Seems(Don’t believe all common knowledge)

Discussion Topics

� The Global Economy is in Serious Decline

� Panama Canal Expansion Has Begun(third set of locks)

� A New US President has Taken Office with the Promise of Hope and Change

What Decade are We Talking About?

Market

Shape and Timing of the Recession: Impact on Trade

AAPA Container volumes, BEA US Real GDP

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

199119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

08*

US TEUs US Real GDP

Market

What Kind of Recession?

InvestmentConsumptionGovernmentExports – Imports

2001: Investment

Current Recession

0

500

1,000

1,500

2,000

2002-I

2002-IV

2003-III

2004-II

2005-I

2005-IV

2006-III

2007-II

2008-I

2008-IV

Total Fixed

Nonresidential

Residential

Real Residential Investment Began to Decline in 2006 Q1

Billions Chained (2000) Dollars, US BEA

Residential Investment For exporters of wood products, the US recession began in 2006

0

5

10

15

20

25

199219

9419

9619

98

200020

0220

0420

0620

08*WorldTotalCanada

China

Brazil

Chile

$Billions nominal, US Census

Market Dynamics and Trade Consumption Continued to Grow

-5

-4

-3

-2

-1

0

1

2

3

4

5

200

5-I

200

5-II

200

5-III

200

5-IV

200

6-I

200

6-II

200

6-III

200

6-IV

200

7-I

200

7-II

200

7-III

200

7-IV

200

8-I

200

8-II

200

8-III

200

8-IV

Percent Change in Real Consumption, US BEA

Market Dynamics and Trade

-5

0

5

10

15

20

25

30

1929

1932

1935

1938

1941

1944

1947

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

Consumption Was Boosted by Historically Low Savings Rates

Savings rates below 1% were recorded in 2005-2007, the first time these rates have been below 1% since 1932-1934

Source: US BEA

Market Dynamics and Trade

-5

-4

-3

-2

-1

0

1

2

3

4

5

200

5-I

200

5-II

200

5-III

200

5-IV

200

6-I

200

6-II

200

6-III

200

6-IV

200

7-I

200

7-II

200

7-III

200

7-IV

200

8-I

200

8-II

200

8-III

200

8-IV

Percent Change in Real Consumption, US BEA

Friday, the BEA reported preliminary GDP figures for 2008 Q4 showing consumption falling 3.5% after a Q3 drop of 3.8%

Market Dynamics and Trade Consumption Growth in is Uneven by Major Category

0

1,000

2,000

3,000

4,000

5,0001992

1994

1996

1998

2000

2002

2004

2006

2008

Services

Nondurable

Durable

Billions of chained (2000) dollars, US BEA

Real Durables Consumption Consumption growth (and decline) is very uneven

0

100

200

300

400

500

1992

1994

1996

1998

2000

2002

2004

2006

2008

Motorvehicles,parts

Audio,video,computers

Furniture &householdequipment

Other

Billions of chained (2000) dollars, US BEA

Motor Vehicles and Parts

0%

10%

20%

30%

40%

50%

199219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

08

Japan

Canada

Germany

Mexico

Korea, South

UnitedKingdomSweden

Within Latin America and the Caribbean, Motor Vehicle (HS 8703) Exports are Concentrated in Mexico

Share of US import value, US Census

Motor Vehicles and Parts

0%

10%

20%

30%

40%

199219

9419

9619

9820

0020

0220

0420

0620

08

Canada

Mexico

Japan

China

Germany

Korea

Taiwan

France

Italy

Brazil

Within Latin America and the Caribbean, Motor Vehicle Parts (HS 8708) Exports are Concentrated in Mexico and Brazil


Exports of Durable Goods US Imports of TV receivers and monitors (HS 8528)

0%

20%

40%

60%

80%

199219

9419

9619

9820

0020

0220

0420

0620

08Mexico

China

Other


Consumption, Nondurables

0

100

200

300

400

500

199219941996199820002002200420062008

Consumption of apparel has leveled off in 2008 after years of steady growth


Exports, Apparel The share of apparel exports from Other Latin America/ Caribbean have declined but not as sharply as in Mexico

0%

10%

20%

30%

40%

50%

199219

9419

9619

9820

0020

0220

0420

0620

08

NE Asia

Southeast Asia

Other LatinAmerica/Caribbean

Mexico


Consumption, Beverages Juices/drinks downWine and coffee steady

0

20

40

60

80

200

6-Ja

n 200

6-Mar

200

6-May

200

6-Ju

l 200

6-Se

p 200

6-No

v 200

7-Ja

n 200

7-Mar

200

7-May

200

7-Ju

l 200

7-Se

p 200

7-No

v 200

8-Ja

n 200

8-Mar

200

8-May

200

8-Ju

l 200

8-Se

p 200

8-No

v

Juices, drinks

Beer

Wine

Coffee, tea


Exports, Beer After gaining share for the past 15 years, Mexico’s share of exports to the US has declined in 2007-2008

0%

10%

20%

30%

40%

50%

1992

1994

1996

1998

2000

2002

2004

2006

2008

Mexico

Netherlands

Canada

Other


Exports, Wine Chile and Argentina are the 5th and 6th largest exporters of wine to the US, and these shares have been increasing

0%

10%

20%

30%

40%

50%

60%

1992

1994

1996

1998

2000

2002

2004

2006

2008

France

Italy

Australia

Spain

Chile

Argentina


Consumption, Fresh Fruit Consumption of fresh fruit continues to climb

99% of US banana imports are from Latin America

0

5

10

15

20

25

199219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

08


Direct US Consumption Impacts

� Highest impact on Mexico

� Relatively small direct impact on Mexican ports

� Modest impact on exporters of durable goods, e.g. Brazil

� Modest slowdown for some nondurable exporting countries, e.g. Central American apparel exporters

� Relatively little impact in other nondurable categories (e.g. coffee, beverages)

� Further decline in exporting of construction-related goods (but higher potential in recovery)

Carrier Impacts – Orderbook

American Shipper 1/13/2009

No 4th quarter containership orders

Need a way to gauge how far demand has fallen for container lines? Not one containership was ordered in the last three months of 2008, according to AXS-Alphaliner.

"It is the first time in at least two decades that no containership orders were recorded for three months in a row," the Paris-based maritime research company said in its latest newsletter. "Meanwhile, a few existing orders have been canceled or converted to other ship types."

The containership order book has fallen to 6.2 million TEUs, its lowest level in 15 months. In the first nine months of 2008, 204 vessels were ordered, with a total capacity of 1 million TEUs. On Jan. 1, the world's containership fleet stood at 4,659 ships totaling 12.3 million TEUs of capacity, 13.2 percent higher than the year before. The total capacity of ships, cellular or non-cellular, running on liner trades increased 11.1 percent to 13 million TEUs.

Carrier Impacts

� Further industry consolidation

� Consolidation and shifting of service patterns

Pamama Canal Expansion

� Planning/Referendum

� Financing

� Project Overview and Status

� Completion in 2014 (100 years)

� Impacts

Expansion Financing


Atlantic Locks

Pacific Locks

Expansion – Larger Ships

Water Saving Basins New Locks will use 7% less water than current locks

Pamama Canal Expansion Impacts

� Doubling of Capacity

� Larger Ships


Doubling of capacity should lead to trade growth

Expansion – Larger Ships

Pamama Canal – Larger Ships

� Container shipping

Lower costs – opportunity Availability of capacity – imperative

� Where does it make sense?

Northeast Asia – US East Coast and GulfContinuation of trend

� Where can it occur?


Where can it occur?


Where can it occur? In New York the Bayonne Bridge blocks access to four out of five terminals.


Norfolk as a destination will become more desirable with the completion of the Heartland Corridor.


If insufficient infrastructure development is completed on the US East Coast, this will tend to spur the expansion of transshipment patterns

Where could this occur?

• Current transshipment ports• Cuba?• Louisiana?• Puerto Rico?• Jones Act?


Scenarios:

Resurgence of West Coast

Lower volumes change perceptionLack of sufficient investment in AtlanticHalt in DC development

Direct Services

New York fixes Bayonne BridgeInvestment is made in South Atlantic

Transshipment

Major new port(s)

Summary

The US and global economic outlook is cause for significant short-term concern, but the impact on Latin American ports may be relatively mild.

US trade growth is likely to slow compared to recent historic norms. The rule of thumb that container trade as a multiple of GDP growth has expired.

Trade within Latin America is likely to grow faster than trade with the US.

Summary

The economic downturn is likely to slow the pace of landside capacity development on the Pacific and Atlantic Coasts:

Possibly slowing coastal shifts in the short termSlowing the development of direct NE Asia-US East Coastservices, accelerating Caribbean and Gulf transshipment

The growing overcapacity in the container fleet will spur new thinking in liner service patterns.

Panama Canal expansion impacts in container trade will befocused on specific trade lanes and commodities.

Infrastructure development can have dramatic and far-reaching effects on maritime trade patterns (Norfolk, Bayonne Bridge)

Scudder SmithPrincipal ConsultantParsons Brinckerhoff

[email protected]

Documents

Market & Industry Trends: Impacts on Latin American and ......Modest impact on exporters of durable goods, e.g. Brazil Modest slowdown for some nondurable exporting countries, e.g