cscmp cincinnati 2013 - logistics · at the transshipment hub for reloading on smaller feeder...

CSCMP Cincinnati 2013 February 21st

2 2 A Member of the Productivity for Progress Institute

Georgia Tech Panama Staff

Darío Solís, Ph.D.

Managing Director

Yuritza Oliver

Senior Research Engineer

Carlos Gómez

Senior Researcher

Pablo Achurra

Research Engineer

Melissa Sánchez

Research Engineer

Juan Carlos Peña

Research Engineer

William Vong

Research Engineer

Danna Ramírez

Research Engineer

Lucía Cheung

Research Engineer

Mónica Saturno

Research Assistant

2


Georgia Tech Faculty and Staff

Amar Ramudhin, PhD

Director

Jaymie Forrest

Managing Director

H. Donald Ratliff, PhD

Executive Director

John Bartholdi, PhD

Co - Executive Director

3


Gold Rush of 1849

DURING THE GOLD RUSH OF 1849, THOUSANDS OF 49ERS

JOURNEYED BY BOAT FROM THE AMERICAN EAST COAST

TO PANAMA AND THEN CROSSED THE ISTHMUS TO BOARD

SHIPS BOUND FOR SAN FRANCISCO BECAUSE THE MIDDLE

AND WESTERN PORTIONS OF THE AMERICAN FRONTIER

WERE STILL LARGELY UNSETTLED AND OFTEN

HAZARDOUS, THE RACE TO THE CALIFORNIA GOLD FIELDS

WENT FASTEST THROUGH PANAMA.

IN RESPONSE TO PROSPECTOR DEMAND, A RAILROAD WAS

BUILT TO CROSS THE TREACHEROUS ISTHMUS IN THE

1850S.

4


Main Topics

Global Economic and Trade Outlook

Economic Perspectives in Latin America

Implications of larger ships and impact for North America

Other Considerations

5


-9

-6

-3

0

3

6

9

2000 2002 2004 2006 2008 2010 2012 2014

-10

-8

-6

-4

-2

0

2

4

6

8

10

Real GDP Industrial Production

(World GDP, Percent change)

The World Economy is still recovering

Source: IHS Global Insight

Cargo trade demand is a reflection of industrial production

Indust. Production, Percent change

6


Ship Happens…

Source: Jean-Paul Rodrigue

7


Source: IHS Global Insight & Halcrow

Source: Global Insight, Worley Parsons

Real GDP (% change)

The emerging markets fared best and are leading the recovery

-4

-2

0

2

4

6

8

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

World Advanced Countries Emerging Countries

US > Europe, Japan

Gap between emerging and

advanced countries will

shrink slightly.

8


1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Pe

rce

tn S

ha

re

(World imports, percent of GDP)

World’s trade share of the economy grows again after

a temporary decline

Source: IHS Global Insight

Globalization trend is long-term and has not reversed or stopped

No change

9


80,000,000

90,000,000

100,000,000

110,000,000

120,000,000

130,000,000

140,000,000

150,000,000

160,000,000

2008 2009 2010 2011 2012 2013 2014 2015

World TEU exceeds the 2008 numbers with Moderate growth

8.8%

FULL TEUs

2008-10 0.0%

CAGR

0.0%

2010-15 6.6%

2015-30 5.0%5.4

%

2010-15 6.2%

2015-30 5.0%

10


Relevant TRADE Implications

North American import growth will be sluggish in 2012

Stronger trade growth is with the emerging markets

After 2012, things should be more “normal”, heading

into the Canal expansion opening (2015)

Transshipment will grow, as a necessity

11


Main Topics



Impact of larger ships and implications for North America

Other considerations

12


Fastest-Growing South American Importers from USA

-7

-5-3

-1

1

35

7

9

Bra

zil

Arg

entina

Nic

aragua

Venez

uela

Chile

Colo

mbia

Peru

Panam

a

2009 2010 2011 2012

5.8

(Real GDP, percent change)

Solid Economic Growth in South America

Source: Data from IHS Global Insight, CIA Factbook, OECD, Moody’s, Goldman

Sachs, Oxford Economics, BMI

US US

13


Important China-Mexico Trade Mexico Trade Partner Shares

0%

5%

10%

15%

20%

25%

30%

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

USA CHINA SOUTH AMERICA EUROPE

CHINA

EUROPE

USA

S. America

14


Colombia Trade Shares

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

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

USA CHINA SOUTH AMERICA EUROPE

Diverse Trading Partners: Colombia

USA

CHINA

EUROPE

S. America

15


Main Topics




Other Considerations

16

17 17 A Member of the Productivity for Progress Institute 17 17

Fact 1: Cargo tonnage growth has greatly

outpaced world population

Index for World Population (Millions)

and World Ocean Cargo (Milions of Metric Tons)

-

50

100

150

200

250

300

350

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

Tons of Ocean Cargo

People

3.7 Billion People

7.7 Billion Tons

2.4 Billion Tons

6.8 Billion People

U.S. Navy Operational Intelligence Center Quote U.S. Census Bureau and AAPA Data

75%

increase in

Tons per

Person


FACT 2 :

Move to Larger Ships

New locks' maximum vessel size: 12,600 – 14,000 TEU

“We intend to deploy the biggest ships as

quickly as possible once the locks are open.”

18

19 19 A Member of the Productivity for Progress Institute 19

In this context, the Panama Canal is important for

U.S. trade.

Panama

Canal

3% of World

Cargo, 66%

touches USA

9% of World

Cargo, 3%

touches USA

Suez

Canal


Two thirds of Panama Canal cargo touches the

U.S., and container ships are 24% of the flow

Bulk ships (mostly grain) and Tank ships (no crude oil) carry specific commodities in unscheduled service.

Consumer goods move around the world on scheduled routes in 20 to 40 foot containers.

Dry Bulk and Container ships push the upper size limits for a significant share or their traffic, unlike other vessels.

Change

Ship Type Annual Share Daily vs 2009

Dry Bulk 3,050 24% 8.4 14%

Container 3,031 24% 8.3 -10%

Tankers 2,233 18% 6.1 -4%

Refrigerated 1,718 14% 4.7 -13%

Others 893 7% 2.4 -5%

Gen Cargo 834 7% 2.3 -4%

Auto Carriers 607 5% 1.7 29%

Passengers 225 2% 0.6 -5%

Total 12,591 100% 34.5 -2%

2010 Ship Transits

40M Tons of

U.S. Export

Grain


Containerships dominate the discussion, but

make up only about 10% of the World Fleet

From Lloyds SeaSearcher extracts on 02 Jan 2011

Product

Tanker

Container

Most consumer

goods move in

Container

Ships.

100% Fit Today

68% 99%

World Fleet

Ship Type All GT 500

All Tankers 11,829

Gen Cargo 8,578

All Bulk 8,427

Gen Cargo With Cont. 5,133

Container 4,923

RoRo 1,230

L P GAS 1,200

Reefer 1,134

RoRo With Pass 866

Vehicle 761

Pass Cruise 430

LNG Carrier 350

RoRo With Cont 148

Full Cell Reefer 18

Sub Total 45,027

21


A larger share of other vessel types will also be

able to make a fully-loaded canal transit.

Dry Bulk

Vehicles

Crude Oil

LNG

Crude Oil

55% 80%

10% 90%

100% Fit Today 0% 42%

http://upload.wikimedia.org/wikipedia/commons/d/d4/Sabrina_I_cropped.jpg


Forecast East Coast Container Fleet

23


Impact of the Panama Canal Expansion?

Larger ships, and more of them, can be accommodated

— Focus is on Bulk, LNG and Container ships

— Not all ship types will increase in size or frequency

Potential economic elements

— Cost per container decreases if ship size increases

— Shippers push to capture the carrier cost savings

— East Coast ports invest to handle more trade from all regions

— West Coast ports respond competitively

—Location of transhipment is key

Major questions for an ocean container carrier:

— Do I redeploy part of my fleet to the all-water route?

— Do I keep the savings, or pass it on to my shippers?

24


Potential Impact

The potential for reduced cost of the water route

through the canal may cause freight traffic to shift from

West Coast to East Coast ports.

To take full advantage of the very largest vessels that

will be able to fit through the expanded canal but may

be too large to call at most U.S. ports, a transshipment

service in the Caribbean or a large U.S. port may

develop. The largest vessels would unload containers

at the transshipment hub for reloading on smaller

feeder vessels for delivery to ports with less channel

capacity.

25


Impact of Post Panamax Ships

Not likely to reduce freight rates

– 12,000 TEU ships are about 10%

per slot cheaper to operate

Not enough freight for direct lanes

Biggest ships can only access one

east coast US port

There is likely to be a transshipment

hub in the triangle

Connectivity to the transshipment

hub will be critical for competiveness

Ref: Hofstra University, Dr. Jean-Paul Rodrigue Factors Impacting North

American Freight Distribution in View of the Panama Canal Expansion 2010

26


27

P. CABELLO P. of SPAIN

RIO HAINA

SAN JUAN

CAUCEDO

Caribbean Transshipment Triangle

FREEPORT

COLON/MIT

KINGSTON

CARTAGENA

CUBA

The best transshipment options are now becoming clear.

MOIN At capacity


Moín – Limón, Costa Rica

$992 million by APM Terminals

Designed for 100% domestic cargo

only – but transshipment is possible

Concession approved - April, 2012,

1.2M TEU in Year 1

It’s all about productivity


Other Wishful Thinkers in the Caribbean

Many small islands are thinking of developing their

ports into transshipment hubs. Examples are:

• Guadeloupe

• St. Kitts

• Curacao

• Margarita (Ven)

• Puerto Rico (Port of the Americas)

• Trinidad & Tobago

29


30

Short Sea Shipping in MesoAmerica

will require transshipment.

30

US

-PA

NA

MA

Countries

Mexico (south)

Belize

Guatemala

El Salvador

Honduras

Nicaragua

Costa Rica

Panama

Colombia

Dominican Republic


There are truths and myths when

it comes to the economics of bigger containerships

The PPX ships bring new

efficiencies (lower costs) per TEU

The PPXs make money only when

steaming

The PPXs will call many ports on

the USEC and in the Caribbean

Many ports can quickly and

efficiently handle 8000+ TEUs

from one ship

TRUE FALSE

31

32 32 A Member of the Productivity for Progress Institute 32 32

East Coast ports already handle Post-Panamax

ships, but few ships above 6,000 TEU

PORT

ALL

CALLS

4400 to

6000

6000 to

8000

GT

8000

GT

4400

GT

6000

New York 4,690 1,942 71 35 44% 2%

Norfolk 1,748 915 49 34 57% 5%

Portsmouth 1,714 360 43 19 25% 4%

Savannah 3,535 1,653 149 4 51% 4%

Charleston 2,605 741 109 32 34% 5%

Jacksonville 867 245 5 - 29% 1%

Miami 1,755 475 - 1 27% 0%

Port Everglades 1,717 124 42 - 10% 2%

CAN - Halifax 709 597 2 - 84% 0%

CAN - Montreal 491 47 - - 10% 0%

Houston 1,909 276 49 - 17% 3%

Mobile 340 40 - - 12% 0%

Long Beach 2,212 519 254 250 46% 23%

Los Angeles 2,820 997 554 241 64% 28%

CAN - Prince Rupert 199 143 41 9 97% 25%

CAN - Vancouver 1,103 494 202 78 70% 25%

Grand Total 28,414 9,568 1,570 703 42% 8%

Two Years of Containership Calls

November 30, 2008 to December 01, 2010

East

West


Cost per TEU - Shanghai to Louisville KY

4000 TEU 8000 TEU

Intermodal Panama Intermodal Panama

Cost Days Cost Days Cost Days Cost Days

Ocean $1,302 13.7 $2,085 23.7 $1,155 9.8 $1,830 22.8

Inland $2,564 8.3 $1,077 4.2 $2,564 8.3 $1,077 4.2

Total $3,865 22.0 $3,162 27.9 $3,719 18.1 $2,907 27.0

On Asia-US East Coast, the all-water Canal route

cost is lower on larger ships

33


$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

All-Water (Current) All-Water after Expansion

4000

TE

U

8000

TE

U

On Asia-US East Coast, the all-water Canal route

cost is lower on larger ships

34


For a typical Asia-US East Coast voyage, shifting to an 8000 TEU

ship expands the market reach of the US East Coast ports

48%*

4000 TEU ship 8000 TEU ship

Assumptions

Shanghai to Louisville, KY

Canal tolls based on current rates

Owned ship, financed at current rate

Inland move by rail

61%*

*Share of the US population reachable by rail

Intermodal Advantage Canal Advantage

2015 NOW

25

0 -

0 -

-25

0 -

-60

0 -

-75

0 -

-10

00

-

-12

50

-

61%*


Shippers consider much more than ocean

shipping rates when designing a supply chain

Transportation Costs – Truck or rail to port

– Port to port ocean costs

– Canal and port fees

– Intermodal or truck for land-based line haul

– Drayage truck to DC or store

Inventory Costs – Warehousing and origin accumulation before shipment

– In-transit pipeline days

– Value and decay as shelf life is consumed in transit

– Safety stock to cover transit reliability and demand fluctuations

Other Costs – Transloading, mixing and consolidation services

– Projected carbon footprint tax

– Switching costs for IT and other structural elements


In the Shanghai to New York example, commodity

value is a strong driver of total cost

High Value goods can be worth $300,000 per Container

– 385 FEU: Logistics adds $3.5M annually to the $120M product cost

– Inventory and Safety Stock costs are high

– Transportation costs are 40% of logistics costs

– West Coast landing has 2% cost advantage

Average Value goods worth $70,000 per Container

– 214 FEU: Logistics adds $1.1M annually to $15.3M product cost

– Inventory and Safety Stock costs are low

– Transportation costs are 80% of logistics costs

– East Coast all water route has 2% cost advantage

For each commodity, the difference per load is in the range of $200 to $300 per 40 Ft container and is sensitive to service changes, canal tolls, handling fees or a changing ocean rate differential

This is one comparison of thousands. Shipper-specific rates, costs, times, distances, densities

and volumes are required to analyze specific supply chains.


Different Stakeholder Perspectives

Carrier perspective

– Transportation assets move in cycles or routes so flow balance matters

– Larger transportation assets are generally more efficient per unit

transported than smaller assets

– Ship utilization is improved by multiple stop routes

– Carriers control ship routes

Shipper perspective

– Total landed cost includes both transportation and inventory

– Increasing transit time increases inventory

– Increasing transit time variability increases inventory

– Trend toward shippers controlling container routing

38


Applying the estimated shipper economics to

each port generates a line of indifference.

Annual

difference is

about 2%.

Small changes

in assumptions

can cause a

shift in who

“wins”.

$600 $1200

$1800

$3,400 via LA $3,600 via Canal

Indifference

Line Using

4400 TEU Ship

via Norfolk.

$3,100 via Canal for

Norfolk Local

This iteration of model

results is based on

estimated ship

operating cost model,

not retail ocean prices.

Examples Use:

Microwaves, which are

worth about $70,000

per FEU, roughly the

average value per FEU

for U.S. Imports

Use Canal Use Landbridge Note: All examples

include a $30 per ton

tax on CO2 emissions,

at 22 pounds of CO2 per

Gallon of Diesel.


Increasing ship size to 8000 TEU via the East

Coast lowers ocean carrier costs about $300.

$600 $1200

$3,400 via LA $3,300 via Canal

Indifference

Line shifts

West, when

using 8000 TEU

ship via

Norfolk.

Microwaves are worth

about $70,000 per FEU,

roughly the average

value per FEU for U.S.

Imports

Indifference line moves west

to Alabama and Mid-Ohio, but

only if shippers capture the

ocean carriers’ cost

reductions.

This iteration of

model results is

based on estimated

ship operating cost

model, not retail

ocean prices.

$2,800 via Canal for

Norfolk Local, vs

$3,100 with 4400 TEU

Vessel.


Average-Value Goods: Indifference line shifts

west with fuel tax, slow steaming and ship size

24 Knots India

Sourcing

24 Knots $2

Fuel Tax 24 Knots 8000

TEU

24 Knots

4400 TEU



roughly the average


Imports

20 Knots 8000

TEU


results is based on

estimated ship



Note: All examples




Gallon of Diesel.


High-Value Goods: Current indifference line

hugs the eastern shore, then moves west

42

20 Knots 8000

TEU

24 Knots 8000

TEU

24 Knots

4400 TEU

24 Knots $2

Fuel Tax

24 Knots India

Sourcing

Shoes worth about

$300,000 per FEU,

roughly four times the

average value per FEU

for U.S. Imports


results is based on

estimated ship



Note: All examples




Gallon of Diesel.


Reactions are not immediate: Potential shifts

must be viewed in an existing network context

$600

$1200

= Existing Import DC

India

Sourcing

$2 U.S. Fuel

Tax East Coast

8000 TEU



roughly the average


Imports

Average

Value

Today

High Value

Today

This iteration of

model results is

based on estimated

ship operating cost

model, not retail

ocean prices.

Reactions could

include changing

prices, improving

productivity, shifting

production, building

alliances and many

other elements.


In Summary: The ability to move larger ships

will create many opportunities

Ocean container carrier costs decline, if larger ships are

repositioned into the all water route

— Shippers are aware of potential for lower carrier costs

— Ocean carriers must balance Price versus Share

— East Coast ports will continue to invest, to handle more trade and

larger vessels from Europe, South America and the Far East

— West Coast ports will respond to the competition

— All options should be weighed in the context of China’s decreasing

labor multiple versus the United States

Other trades could be affected

— Most of the LNG fleet will be able to move between Pacific and

Atlantic Basins, if market forces warrant

— Grain ships will be much less constrained by canal size

44


Main Topics




Other considerations

45


Preparing for Post-Panamax Vessels

46


Post Panamax Vessels

Potential to provide a cost-effective complement to

the intermodal transport of imports via the U.S. land

bridge

Re-shape the service from Asia to the Mediterranean

and on to the U.S. East Coast

Affect the highly competitive transport price

structure along the Midwest to Columbia-Snake

route for grain and other bulk exports bound for

trans-Pacific shipping

47


U.S. Golf and South Atlantic Ports

Inland waterways play a key role in the cost efficient

transport of grains, oilseeds, fertilizers, petroleum

products and coal. Gulf ports play key roles in the

transport of these commodities, such as New

Orleans being the dominant port for the export of

grains from the U.S

The expanded Canal could provide a significant

competitive opportunity for U.S. Gulf and South

Atlantic ports and for U.S. inland waterways

48


US Ports Considerations

West Coast (Los Angeles, Long Beach, Oakland and

Seattle/Tacoma) and East Coast (New York,

Baltimore and Hampton Roads) Ports are expected

to be ready with post-Panamax channels in 2014

Lack of post-Panamax capacity at U.S. Gulf and

South Atlantic ports – the very regions

geographically positioned to potentially be most

impacted by the expected changes in the world fleet.

49


Preliminary results. More studies on the way.

At the Port of Savannah, USACE has identified an

economically viable expansion to accommodate

post-Panamax vessels. This project is estimated to

cost $652 million dollars

Justified investments in inland waterway locks and

dams will be needed to allow the waterway transport

capability to take advantage of an expanded Canal

for U.S. exports

50


Opportunities for Bulk Cargo

On the export side the ability to employ large bulk

vessels is expected to significantly lower the

delivery cost of U.S. agricultural exports to Asia and

other foreign markets. This could have a significant

impact on both the total quantity of U.S. agricultural

exports and commodities moving down the

Mississippi River for export at New Orleans.

51


US Ports Ready for Post-Panamax Vessels

U.S. West Coast ports at

Seattle, Oakland, Los

Angeles and Long

Beach all have 50-foot

channels

Northeastern U.S. ports

at Baltimore and New

York have or will soon

have 50-foot channels.

In the Southeast,

Norfolk has 50-foot

channels

Charleston with a 45

foot channel depth

and nearly 5 feet of

tide can

accommodate most

post-Panamax

vessels

52


Cascade Effect

Big ships displacing small ships across all ship

sizes

New, large vessels are typically deployed on the

longest and largest trade service. The “smaller”

vessels are re-deployed to the next most efficient

service for that vessel size. Cascading typically

increases average vessel size for each trade service

Ports need to be updated to handle larger vessels

(cranes, equipment, infrastructure, etc.)

53


Inland Waterway Connection

54


US Inter-Modal Map

55


North America's Super Corridor Coalition, Inc.

56


Central Ohio River Business Association

CORBA

Interruption of waterway system will have dramatic,

negative effects on the agricultural industry and

American economy

13 million tons of agricultural goods leave the Ohio

Valley via waterway transport and 11 million tons

end up passing into the Gulf of Mexico

Waterway system also allows efficient transport of

coal and fuel resulting in reduced energy costs

57


Things to consider for Coastal Ports from Report

Increase Federal appropriations in the USACE budget for

harbor maintenance and improvements while maintaining

current cost share responsibilities

Increase Harbor Maintenance Trust Fund (HMTF) user fees

and allocate increased revenues to harbor improvements

Maintain or increase Federal appropriations and also increase

local cost share requirements

Encourage individual port initiatives by phasing out the HMTF,

expecting individual ports to collect their own fees and make

their own investment and maintenance decisions

58


Things to consider for Inland waterways

Increase the fuel tax and provide increases in

Federal appropriations. Replace the fuel tax with a

vessel user fee and/or combine the fuel tax with a

vessel user fee and increase revenues and

appropriations for improvements at least by the

amount of the increased revenues

Implement public-private partnerships with the

responsibility for improving, operating and

maintaining the inland waterway navigation

infrastructure along specified segments of the

system

59

Questions and Comments

60

cscmp cincinnati 2013 - logistics · at the transshipment hub for reloading on smaller feeder...

Documents