What’s Down the Road?aapa.files.cms-plus.com/SeminarPresentations/07_PUBREL_West_Ro… · What’s Down the Road? Presented to: AAPA Public Relations Seminar 13 June, 2007 Radisson

1Copyright © 2007 Global Insight, Inc

What’s Down the Road?

Presented to:AAPA

Public Relations Seminar13 June, 2007

Radisson Resort at the PortCanaveral, FL

Presented by:Robert West

Managing Director - MaritimeGlobal Trade & Transportation

Global Insight781-301-9078

[email protected]


Agenda

• Global issues and trends affecting the world and U.S. economic outlooks

• Implications for ports in the Western Hemisphere

• Conclusions & things to remember


Key Global Issues and Trends

• Will higher oil prices derail the recovery?

• Will the dollar crash?

• China: Hard or soft landing?

• New and important players?

NO - Not at $70-75

NO, but . . .

SOFT

YES, A COUPLE . . .


Has world economic growth peaked? - - - yes, but…

0

1

2

3

4

5

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

(Percent change, real GDP)

The world economy is in recession when real GDP growth is below 2%.


World container trade normally grows faster than the world economy. And 2006 was very healthy.

-1

1

3

5

7

9

11

13

15

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

World GDP% TEUs

2006 2007

GDP 4.0% 3.5% TEUs 9.6% 8.9%

2006 2007

GDP 4.0% 3.5% TEUs 9.6% 8.9%


Trade is linked to real GDP growth - uneven across the world – and emerging markets grow fastest.

0

2

4

6

8

10

NAFTA OtherAmericas

Japan WesternEurope

EmergingEurope

Other Asia India Mideast &Africa

2005 2006 2007 2008

(Percent change, real GDP)


Europe in the long term – a great museum?

… and the visitors will come from China!


Growth is not uniform: Market shifts are coming and will affect U.S. trade and transportation

(Country GDP Rank in Billions of Real (2003) U.S. Dollars)

ItalyItalyItalyBrazilBrazilRussiaFranceFranceBrazilItalyRussiaIndia

GermanyGermanyFranceRussiaIndiaBrazilU.K.U.K.GermanyFranceItalyChina

RussiaBrazilU.K.IndiaFranceItaly

BrazilRussiaRussiaU.K.ChinaFrance

JapanJapanIndiaGermanyU.K.U.K.IndiaIndiaJapanJapanGermanyGermany

U.S.ChinaChinaChinaJapanJapan

ChinaU.S.U.S.U.S.U.S.U.S.

205020402030202020102000

Source: Global Insight World Service and Goldman Sachs


The U.S. expansion is entering a new phase –a major U.S. slowdown is already here.

• The U.S. economy started to slow in 2006.• 2.2% in the first quarter 2007• Just 2.4% in the last quarter!

• Real GDP growth in 2007 will slip to 2.1%, below trend (3%).• Home sales and construction are declining as affordability

deteriorates.• Business investment is now leading the expansion, supported

by record profits and global market growth, especially Asia.• Non-residential construction is poised to grow, at last.• Further dollar depreciation is expected, so exports will

improve.

A weak start and a faster finish in 2007


(Annual percent change, 2000 dollars) (Unemployment rate - %)

The U.S. economic expansion has slowed quickly. Modest improvements in 2007 –slower than the world.

-2

0

2

4

6

8

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20102

3

4

5

6

7

Real GDP Growth Unemployment Rate

Real GDP

2006: 3.3%

2007: 2.1%


A Record U.S. Current Account Deficit – over $800 billion as far as the eye can see. But peaking at last!

-$1,000

-$800

-$600

-$400

-$200

$0

$200

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010-8

-6

-5

-3

-2

0

2

Current Account Deficit Deficit as % of GDP

(Billions)


The U.S. dollar will depreciate further – steady declines through 2008, due to huge current account deficits.

0.7

0.8

0.9

1.0

1.1

1.2

1.3

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Industrial Countries Developing Countries

(2000=1.00)

This could be another 10% drop in the dollar.


The U.S. was the engine of growth, but in 2006 this shifted to Asia, which is now supporting world economic growth.

• Inflation remains under 4% in most Asian economies — exceptions include Indonesia, India, and the Philippines.

• High saving rates mean these economies will continue to be capital exporters - investors in ports and transportation infrastructure (even Canals?).

• China will have a soft landing.

• 1/3 of the world’s container trade is Intra-Asia!


US TEU Imports

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

European Union Latin Amer (Not Mexico) Middle East + ISC Other Far East China - HK

U.S. TEU imports will slow to 5.6% in 2007, then 7.6% in 2008. Chinese imports will grow fastest (10% on average).

China

Other Far East

China was 1/3 of US imports in 2000 and will be 1/2 by 2013.


China’s momentum is hard to slow down, but the China government is trying - - - soft landing most likely.

1980 2004Real Per Capita GDP (2004$) $171 $964Real GDP as % of US Level, 2004$ 3% 14%Real GDP growth in previous 20 years 5.3% 8.6%Population (millions) 981 1,300Trade's share of GDP 15% 85%Number of Supermarkets 0 70,000Current Account Surplus ($ billions) 1 266Agriculture's share of GDP 30% 15%Urbanization 20% 33%


Market penetration in some sectors is reaching saturation …

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Footware Electrical Appliances and Houseware Textiles

Footwearr Electrical Appliances

Textiles


But look at China’s penetration of new market segments.

0%

10%

20%

30%

40%

50%

60%

70%

80%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Semi-conductors, Electronic Tubes,etc Office and Computing Machinery

Office and Computing Equipment

Semi-conductors, Electronic parts, etc.


China Economic Summary

• There appears to be little risk at the macro-economic level. Even with a “soft landing” we will see growth in excess of 8% GDP through 2010.

• The exchange rate will revalue smoothly.• The financial markets, although not exactly strong

(week of Feb. 26), are also not seriously in danger of toppling.

• So long as Foreign Direct Investment continues, we will see the continuation of an export driven economy.

• RISK: the new urbanized masses are not keeping up with inflation


There are some New Players on the world scene

•Chindia

•Colombia


India could align with China (creating CHINDIA) and create a powerhouse from toys to high tech.

• $800 billion GDP• 8%/year TEU growth to 2010• 6.8% GDP growth this year (2006)• 1.1 billion population is growing 1.5% annually

India and China Real GDP Growth Rates

0.0

2.0

4.0

6.0

8.0

10.0

12.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

India Real GDP China Real GDP

India

China

INDIA


In Latin America, Colombia is a new, fast-growing player.

• Free trade deal with the USA (hopefully)

• Potential growth is 5+% per year (GDP) – and steady

• Privatized ports• Strong import growth for

containers – 18% in 2006• Domestic economic strength – 6%

in 2006• Growing consumer sector

• Port infrastructure is being expanded to meet demand growth.

• Main rail link to be revitalized in 2008.

Colombia


Agenda





For USWC ports, imports from China will double by 2015.

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

USWC Imports

China - HK Rest of Far East Latin Amer (Not Mexico) Middle East European Union Rest of World

Source: Global Insight World Trade Model

CHINA

• In 2000, 1 in 2 containers came from China.

• This year, 63% of USWC imports will come from China.

• By 2015, 3/4 of the imports will come from China.

2006-07 2007-2015China 10.5% 8.6%Rest of World 4.0% 4.5%


As China expands its markets, the U.S. becomes less important, but Latin America - -

US Share of China Exports

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

TEU

s

29.0%

30.0%

31.0%

32.0%

33.0%

34.0%

35.0%

36.0%

37.0%

38.0%

39.0%

40.0%

US

Shar

e

World Total United States United States Share of Ch Exp



. . . could absorb 10% of China’s container exports by 2015, with strong growth in consumer products.


0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

World Total Latin America LA Share


Is there a capacity crunch on the USWC?

• There is a lot more throughput capacity that is achievable• More flexible work rules? 2008 ILWU labor agreement?• Introduction of more technology for container handling?• Expand PIERPASS OffPeak program (LA, LB)

– Currently Monday – Thursday evenings and Saturday mornings• Other USWC ports could adopt an off-peak option.

• Environmental considerations may force the crunch to hit sooner• Increases in port charges to pay for environmental compliance

• As USWC port costs increase, shipping lines will look to other options, like Mexico and Canada.


Some Mexican alternatives are being discussed – to feed the US market, in case there is a capacity squeeze.

Punt

a C

olon

et

Lazaro Cardenas

Manzanillo

Alfa-Omega Line

• Container volumes will continue to grow.

• USWC port and rail congestion could return – 5-10 years?

• All-water service costs will go up.• But there are wrinkles to iron out in

Mexico.

• MHFM Transport (Mexico)• SPV (Japan)• Arias Asia (China)

$9 billionUP + HutchisonBNSF + Grupo MexicoMTC + Carlos SlimOthers?

MexicanRailways


Keys to competitiveness

• The ports and inland infrastructure must be made more productive and expanded in some cases.

• Asian ports have increased productivity much faster than European or U.S. ports.

1999 2004 CAGRAsian Ports 9,272 16,595 12.3%European Ports 4,284 6,396 8.3%U.S. Ports 2,894 4,018 6.8%

Source: John Vickerman, TransSystems, CI Database, Seaports of the Americas

TEUs/acre/year


Container vessel wait time at LA/LB – a short interruption of service, affecting productivity, can cause . . .

0

50

100

150

200

250

Jan-0

4

Feb-04

Mar-04

Apr-0

4May

-04

Jun-0

4

Jul-0

4Aug-04Sep

-04

Oct-04

Nov-04Dec

-04

Jan-0

5Feb

-05Mar-

05

Apr-0

5May

-05

No.

of V

esse

ls

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Avg

Day

s at

Anc

hor

No of Container Ships at LA/LB that had to anchor awaiting a berth Average No. of Days at anchor

Source: John Vickerman, TranSystems, derived from data from Marine Exchange of Southern California


… a fast shift by carriers to alternate routes. Here, carriers shifted to the US East Coast through the Panama Canal.

US Coastal Shares, from China, Japan, Taiwan, and S. Korea

46.0%

47.0%

48.0%

49.0%

50.0%

51.0%

52.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

USEC USWC

62% of the growth in US imports from North Asia shifted to the USEC in 2002 – fairly elastic.

And a $13 billion impact on the U.S. economy, in 10 days



Within the containership fleet, Post-Panamax is the fastest growing vessel type.

-4%444443444445452461Feeder

3,982

728

1,051

629

642

488

2007*

3,640

675

979

574

578

391

2006

37%3,3793,2073,0522,908All Containerships

33%626593565548Feedermax

20%935915890874Handy

46%529498464432Sub-Panamax

64%513473435392Panamax

143%332283246201Post-Panamax

% ∆2002- 07

2005200420032002Vessel Type

Number of Vessels in Operation

*2007 data is as of January


With a third set of locks, container traffic will account for nearly 60% of all Canal tonnage in 2025.

Dry Bulk20%Liquid Bulk

12%

Passenger4%

Car Carrier13%

Other7% Container

s34%

General Cargo

3%Refer. Cargo

7%

Dry Bulk14%

Liquid Bulk5%

Passenger4%

Car Carrier11%

General Cargo

1%Other

2%

Refer. Cargo

4%

Containers

59%

Panama Canal Tonnage: 2005 vs. 2025

20252005

Source: ACP; Norbridge, Global Insight forecasts


CARTAGENA

COLON/MIT

P. CABELLOP. of SPAIN

KINGSTON

FREEPORT

RIO HAINASAN JUAN

CAUCEDO

Caribbean Transshipment TriangleCaribbean Transshipment Triangle


50.2

%

47.7

%

40.2

%

38.7

%

50.5

%

49.0

%

59.5

% 58.3

%

51.6

%

52.1

%

42.2

%

42.5

%

22.9

%

25.1

%

34.3

% 31.0

%

30.0

%

27.8

%

25.1

%

23.0

%

33.7

%

30.3

%

41.6

%

38.9

%

14.5%

16.7%

17.3%

18.6% 13.2%

14.3%

10.3%

11.2%

9.9%

10.4%

11.1%

11.1%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Panamá Suez Panamá Suez Panamá Suez Panamá Suez Panamá Suez Panamá Suez

2001 2002 2003 2004 2005 2006

Ship provision costs Fuel costs - sea Fuel Costs - Port

Fuel costs - Canal Canal fees Port fees

Source: Panama Canal Authority

Panamá – Suez Route Cost Comparison:Northeast China to USEC

Suez FeesPanama Fees


Will the PPX ships use the expanded Canal?

• These ships seek hub-hub routes• High utilization needed in each direction• Not efficient for multiple port calls (USEC)• Could transship in one major Caribbean

hub port• Will there be enough backhaul to make

money?• Laden Canal tolls will apply in both

directions – even if there is only “one banana on board”

• Perhaps the ships will remain on the transpacific• Fewer ships needed for weekly service to

USEC• Better chance of strong backhaul cargo• More options available for overland

intermodal connection

NOYES

• Round-the world• One USEC or Caribbean port call• No concern about the backhaul


Agenda





Bottom Line

• To have any hope of forecasting the future correctly, do it often.

• Every international container can reach its destination by 2 routes, or more.• The Panama and Suez Canals do compete.

• The search for alternative gateways is on.

• China will not take over the world, but Chindia might!

• Enormous growth in container traffic and the shift to PPX vessels will push many ports to their full capacity limits, before the Canal expansion is ready (2014).

• USWC ports are currently not in a capacity crunch but they will be forced to expand operational throughput.• Will “just in time” become logistical archeology?


What’s Down the Road?

Presented to:AAPA

Public Relations Seminar13 June, 2007

Radisson Resort at the PortCanaveral, FL

Presented by:Robert West

Managing Director - MaritimeGlobal Trade & Transportation

Global Insight781-301-9078

[email protected]


Latin America’s sea trade is expected to grow in line with general world sea trade growth. Imports will outpace exports.

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

TEU

s

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Latin America Imports Latin America Exports

2007 2007% 2005-20 2010-15IMPORTS 5,036,890 7.2% 6.4% 4.6%EXPORTS 7,782,651 5.7% 5.1% 4.1%


L.A. imported 1.5 million TEUs from the U.S. in 2006.

2007 1.5 million TEUs


3% average annual growth

Imports from the Far East (China) will grow by 7.1%/year and hit 2 million TEUs in 2015.

Far East


0

500 ,000

1,000 ,000

1,500 ,000

2,000 ,000

2,500 ,000

3,000 ,000

3,500 ,000

4,000 ,000

4,500 ,000

Expor ts Imports

West Coast South America

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

E xports Imports

EC South America

EXPORTS

IMPORTS

West Coast, South America East Coast, South America

South America’s east & west coasts are export oriented, but imports will grow faster.

EC South America 2006 2010 CAGR%Exports 4,242,497 5,050,706 4.5%Imports 2,078,162 2,620,572 6.0%

WC South America 2006 2010 CAGR%Exports 1,566,754 1,896,612 4.9%Imports 804,329 1,018,626 6.1%

TEUs


Caribbean and Central America are fairly well-balanced.

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

Exports Imports

Caribbean

EXPORTS

IMPORTS

Caribbean 2006 2010 CAGR%Exports 765,407 912,922 4.5%Imports 941,749 1,093,995 3.8%

750,000

800,000

850,000

900,000

950,000

1,000,000

Exports Imports

Central America

Central America 2006 2010 CAGR%Exports 876,189 1,014,329 3.7%Imports 859,621 1,080,414 5.9%

TEUs


Each part of Latin America depends much more on the Far East for imports than for exports.

WCSA Exports - 2006

Indian Subcontinent0%

AFRICA0%

Latin America9%

Far East17%European Union

22%

NAFTA48%

ROW3%

Middle East1%

WCSA Imports - 2006

Indian Subcontinent1%

European Union16%

Latin America 22%

NAFTA30%

Far East28%

AFRICA1% ROW

2%

Middle East0%

Imports ExportsWCSA 28 17ECSA 24 12Cen Amer 33 2Caribbean 17 1

Far East Share (%) of Container Trade




L.A. containers to the U.S. in 2006 = 3 million

Almost 4% average annual growth

Exports from Latin America to the Far East (China) will grow by 6.0%/year and hit 1.4 million TEUs in 2015.

Far East

Documents

What’s Down the Road?aapa.files.cms-plus.com/SeminarPresentations/07_PUBREL_West_Ro… · What’s Down the Road? Presented to: AAPA Public Relations Seminar 13 June, 2007 Radisson