Lots of Moving Parts
Dan Solomon and Walter Kemmsies
Moffatt & Nichol Advisory Group
Moffatt & Nichol Background
• Established in 1945 in Long Beach, California, currently:
• Offices in the Americas, Europe, Middle East and Pacific Rim
• Practices: Goods Movement, Energy, Ports, Coastal, Urban Waterfronts & Marinas, Inspection &
Rehabilitation
• Planning and design of marine and freight transportation
•
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•
•
•
•
•
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Terminal design for all types of freight and passenger movement
Freight planning and market analysis
Investment/privatization analysis
Strategic development plans
Port selection/network analysis
Coastal engineering
Port and waterside construction (marinas)
Railroads and capacity expansion
Environment issues/emission modeling
Port security
Commentary and presentation materials on this occasion are based on
the personal views of the speakers and may not coincide with opinions
held by Moffatt & Nichol or its employees.
3
Major Trends
• State of the World
•
•
•
•
•
US economy has been the main driver of global economic growth since 2011
US economy at long term average activity levels but below potential output levels, the residential real estate market remains
restrained due to contractionary financial regulations
Europe is past its worst point but faces a long recovery period depending on the ECB’s success in implementing Quantitative
Easing and fiscal stimulus, Grexit and Brexit not withstanding
Asian manufactured goods exporters have low domestic demand growth
Commodity export-driven economies will languish until Asian manufactured goods exporters regain growth momentum
• Key Uncertainties in 2015
•
•
•
Deflation is driven by excess commodity production capacity and automation as well as aging developed economy consumers
and insufficient demand in emerging markets
Federal Reserve is slated to start raising interest rates which may have a larger impact globally than domestically and is likely to
further increase the foreign exchange value of the US dollar
Commodity prices, oil in particular, will be weighed down by a strengthening US dollar but could get a boost from a surge in
global infrastructure investment
• Long Term Scenario Differentiators
• US trade deficit is unsustainable and a major risk to global growth
• China and other emerging market economies, as well as the US, need to maintain “Fordism” policies
No Fordism in China
China Emphasizes Fordism
US Infrastructure Investment
Medium growth, deflation risk
High growth, low inflation
No US Infrastructure Investment
Low growth, deflation risk
Medium growth, high inflation
4
US has led global growth
CONTRIBUTIONS TO CHANGES IN GLOBAL REAL GDP GROWTH: 2014 COMPARED TO 2013
After pulling the world economy into a severe recession, the US has been driving global economic recovery, more so in the last few years.
Europe and Asia should be stepping up soon and eventually commodity-exporting economies.
Source: Bloomberg, IMF, Moffatt & Nichol
5
US Economic Scorecard is positive for 2015-2016
The most significant factor is the degree to which the Fed feels it needs to preempt inflation. This is a Recovery Period score card, once
the Fed starts hiking a different score card will be used. Real GDP growth is forecasted to be 2.9% in 2015 and 2016.
Indicator
Score
Considerations
Monetary Policy
Neutral
The Fed is withdrawing the punchbowl soon but very gently and politely
Inflation
Positive
A bit low, but little inflation risk.
Fiscal Policy
Neutral
Shifting towards deficit and debt reduction.
Financial Sector
Neutral
FDIC’s watch list declining, consumer credit increasing, regulatory stance has been
contractionary, corporate bond market may present bubble risk
Causes of Last Recession
Positive
Residential real estate sector is in the long process of recovery
Leading Industries
Neutral
Industries likely to lead growth in this cycle have been investing but energy got ahead of
consumption trends
Production Costs
Positive
Low interest rates, wages, commodity prices
Labor Markets
Positive
Employment rising in expected industries, energy sector is shedding employees
Neutral
Central banks are cutting interest rates and increasing liquidity, but Emerging Markets could be
impacted by rising US interest rates and weak commodity prices, and Europe is still dealing with
the legacy of austerity. Stronger US$ means weaker export and therefore economic growth
Global Economy
6
US economy in a virtuous cycle until the Fed decides it isn’t
EMPLOYMENT AND RETAIL SALES VOLUMES
As of May 2014, employment in the US exceeded the previous peak level in December 2007. Monetary and fiscal policy supported
increased spending by employed consumers which eventually reached levels where the private sector needed to hire more labor. This in
turn helped consumer spending, resulting in more employment… a virtuous cycle.
Source: Bureau of Labor Statistics, National Bureau for Economic Research, Moffatt & Nichol
7
Full-time US employment still short of pre-recession levels
US EMPLOYMENT IN NONAGRICULTURAL INDUSTRIES (Not Seasonally Adjusted)
Although the total US work force is larger today than it was just before the recession, full-time employment is yet to make a full comeback.
However, March 2015 numbers put us just 262,000 full-times jobs shy of record highs.
Source: Bureau of Labor Statistics, Moffatt & Nichol
8
Overcoming the bubbles
Consumer Credit & Home Mortgage Loans
Consumer Credit (Revolving)
Mortgage Debt
1,200
12,000
RIP:
Consumer
Credit Wart
2005 - 2011
1,000
600
6,000
400
4,000
200
2,000
0
1990
2005 - 2011
8,000
$ Billion
$ Biilion
800
10,000
0
1995
2000
2005
2010
2015
1990
1995
2000
2005
2010
2015
The fact that the US has come this far during the recovery is impressive given the levels of consumer credit and mortgage debt that the
US consumer sector had in 2008
Source: US Federal Reserve, Moffatt & Nichol
9
Inflation risk is less than growth risk
CORE CONSUMER PRICE INFLATION TRENDS
4.0%
3.0%
Japan
2.0%
US
1.0%
Euro Area
Sep-15
May-15
Jan-15
Sep-14
May-14
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
-1.0%
Jan-09
0.0%
China
-2.0%
-3.0%
-4.0%
Core inflation (excluding volatile food and energy prices) provides a better indication of consumer price trends.
The Federal Reserve is not under pressure from inflation to raise interest rates. Japan finally broke out of deflation but economic growth
remains stalled. The Euro Area is struggling to increase inflation. China is actually experiencing deflation.
Source: Trading Economics, Moffatt & Nichol
10
Strengthening US Dollar may help imports and hurt exports
DOLLAR-EURO EXCHANGE RATE AND THE SPREAD BETWEEN US AND GERMAN GOVERNMENT BONDS
With the US economy leading global growth and inflation, US interest rates are likely to rise ahead of interest rates in other currencies. As
long as an economy is relatively strong and this is reflected in rising (real) interest rates, its currency tends to strengthen. However,
correlation between US Dollar strength and import/export growth is only mildly positive/negative. Strong growth in export destination
countries can overcome the effect of a strengthening US dollar. Investments in infrastructure can also make exports more competitive.
Source: Trading Economics, Moffatt & Nichol
11
Import volumes led US TEU growth in 2014
MONTHLY AND ANNUAL VOLUMES AT MAJOR US PORTS
Total
Total
Loaded
Import
Load
Export
Load
Empty
2006
36,872,549
26,902,788
17,297,240
9,605,548
9,969,762
2007
37,263,101
28,331,823
17,342,377
10,989,446
8,931,278
2008
35,382,311
27,641,905
16,060,599
11,581,306
7,740,407
2009
30,368,529
23,920,945
13,444,526
10,476,419
6,447,584
2010
35,120,125
26,877,744
15,620,245
11,257,500
8,242,381
2011
35,650,253
27,722,873
15,780,519
11,942,354
7,927,380
2012
36,295,886
28,194,242
16,266,504
11,927,738
8,101,644
2013
37,227,612
29,053,063
16,645,540
12,407,523
8,174,549
2014
38,973,674
30,127,816
17,783,189
12,344,626
8,845,858
2015 Q1
9,186,063
7,004,802
4,273,205
2,731,598
2,181,261
2014 Growth
4.7%
3.7%
6.8%
-0.5%
8.2%
2006-14 CAGR
0.7%
1.4%
0.3%
3.2%
-1.5%
Imports drove volume growth in 2014, this shows how the US has been supporting global growth. But looking back to the years before the
recession of 2008-2009, exports have performed a lot better. It is worth noting that there are some months when loaded export
TEUs almost exceed loaded import volumes, which seems to have happened in November 2013.
Peak season import growth is expected to be in the 6% to 8% range. Exports are expected to decline.
Source: AAPA, Moffatt & Nichol
12
US Trade deficit remains high but declining
US TRADE DEFICIT
The US has helped the world economy develop, particularly emerging market economies, by allowing its trade balance to be in deficit.
This isn’t sustainable in the long run. Reducing the trade deficit is important for employment and therefore economic growth. The
decreasing US oil trade deficit has directly helped strengthen our goods balance and in the process helped US employment recover from
the deep 2007-2009 recession. But more, a further reduction in the deficit, is needed.
The US trade deficit skyrocketed by 43.1% in March 2015, led by a 7.7% increase in imports. Although the oil trade deficit continued to
decrease in March, the total goods deficit today stands at $70.56 billion. Who are people blaming? US West Coast Ports and a strong
dollar alongside weak global growth.
Source: US Census Bureau, Moffatt & Nichol
13
Wage differentials drove offshoring, now near and on-shoring
MANUFACTURING WAGE COMPARISONS IN US$ IN 2008 AND 2014E
$55,000
44% of World Population
9% of World Population
$50,000
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
Developed Market
sourcing is shifting from
China to Central America
and South Asia
$15,000
$10,000
$5,000
$0
It is unlikely that manufactured goods, which are labor intensive, will be produced in the US. In addition to lower production costs,
emerging markets also have faster growing demand for manufactured goods. It is not surprising that many factories moved to China and
other emerging Asian economies. Now, with wages rising, Chinese households could eventually be able to afford the goods they produce.
This deliberate effort at “Fordism” sets China apart.
Source: UN ILO, Moffatt & Nichol
14
The World’s Population is Aging
PROPORTION OF POPULATION ABOVE 55 YEARS OF AGE
60%
Japan
50%
Europe
China
40%
Canada
US
30%
Brazil
Mexico
20%
India
10%
0%
1990
2000
2010
2020
2030
2040
2050
15
The ultimate global logistics challenge
WORLD POPULATION AND OECD GLOBAL MIDDLE CLASS PROJECTIONS
Emerging markets are more than just large economies growing quickly, they are developing significant middle classes too. For the
developed economies to sustain higher growth in the long term, they must focus on this market segment. Developed economies need
growth in order to support their retirees. Need more infrastructure and less waste if these forecasts are correct. This is the ultimate global
logistics challenge.
Source: OECD, US Census Bureau
16
Increasingly Urbanized, Increasingly Congested
PERCENTAGE OF URBAN POPULATION AND AGGLOMERATIONS BY SIZE CLASS: 1980 AND 2011
2008
2011
Three major migration trends in the US are to the south, to the coasts and to urban areas. Rest of the world is urbanizing too. Substitution
of capital for labor in rural areas and higher income offered by manufacturing and services in urban areas drive urbanization trends. Better
service supply in urban areas also attracts retirees. In major port cities it is likely that congestion could worsen.
Source: UN Department of Economic and Social Affairs
17
Ecommerce continues to gain share of US retail sale
ECOMMERCE VS BRICK AND MORTAR RETAIL SALES
Ecommerce is gaining share of consumer spending in many countries, with the US among the countries leading the trend. Growing
concentrations of populations in metropolitan regions and growing Internet subscriptions are main driver.
Source: US Census Bureau, Moffatt & Nichol
18
Supply chain/final delivery evolving, impacting retail strategy
ECOMMERCE SERVICE SUPPLIERS
There are many new entrants in the ecommerce market and even more will join. Significant evolution is the only discernible trend.
Source: UPS presentation at Port of Long Beach Pulse of the Port event
19
In China, watch consumers not producers
INVESTMENT CONTRIBUTIONS TO GDP IN SELECT ECONOMIES: 1990 – 2020E
Investment in real estate, factories and infrastructure reached very high levels both in absolute terms and relative to GDP. Since 2011
China has tried to develop domestic consumer spending to reduce dependency on exports and infrastructure programs to drive growth.
Slowing GDP growth in China is not indicative of a recession there but a transition to a more sustainable pattern of economic activity.
Source: IMF WEO, Moffatt & Nichol
20
Ships continue to get larger
EVOLUTION OF CONTAINERSHIP SIZE
FLEET CAPACITY BREAKDOWN BY TEU SIZE RANGE
As of November 1, 2012
12% > 10K
As of April 1, 2015
20% > 10K
Source: Alphaliner, Moffatt & Nichol
21
Ocean carriers: An industry in transition
SHIPPING ALLIANCES, EAST-WEST
G6
CKYHE
O3
2M
APL
Cosco Container Lines
CMA GGM
Maersk
Hapag-Lloyd
K Line
China Shipping Container Lines
MSC
Hyundai Merchant Marine
Yangming Marine Transport Co.
UASC
Mitsui OSK Lines
Hanjin Shipping Co.
And Hamburg-Sud?
NYK Line
Evergreen
OOCL
Ocean carriers are purchasing bigger and bigger ships in an attempt to lower slot costs. Ocean carriers have also been getting rid of
chassis, terminal assets, and other asset holding to cut costs. As a result of these gigantic vessels, the following is true:
• Fewer ports of call
• New Mega Alliances have formed to fill the ships and offer weekly schedules
• Automation of terminals to increase productivity is necessary
• There is a mismatch between ship infrastructure and landside infrastructure
Shipper demands:
• As fast as possible
• As reliable as possible
• As cheap as possible
22
More freight in fewer gateways
US INTERNATIONAL CONTAINER VOLUMES AND PORT SHARES: 1974-2014
100%
40
95%
35
30
90%
25
85%
20
15
Share of Total
Millions of Twenty Foot Equivalent Units (TEU)
45
80%
10
75%
5
Top 10 Share (right)
All Ports
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
70%
1974
0
Top 10
As volumes concentrate in fewer ships to reduce average fixed costs per slot, they concentrate in fewer ports to increase revenuegenerating time.
Source: AAPA, Moffatt & Nichol
23
Congestion is a global problem that needs local solutions
TRUCK TRAFFIC IN ROTTERDAM
TRUCK LINES AT THE PORT OF PARANAGUA, BRAZIL
PORT TRAFFIC IN SOUTHERN CALIFORNIA
PORT OF SHANGHAI, CHINA
24
Battleground for North Asia container imports mainly in South
SHARES OF IMPORTS (TONS) ARRIVING ON VESSELS CARRYING
CONTAINERS FROM ASIA
TOTAL NORTH AMERICAN CONTAINER VOLUME TRENDS
30
25
Million TEUs
20
15
10
5
Pacific
Atlantic
Gulf
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
0
n West Coast Share >60%
n
East Coast Share >60%
n No share >60%
The Freight Analysis Framework database shows the economic zones that are dominated by West and Gulf/East Coast ports, and where
neither has a dominated share.
Source: US Department of Transportation – Freight Analysis Framework
25
LA/LB vs NY/NJ import composition
LOS ANGELES/LONG BEACH TOP IMPORT COMMODITIES: 2007 VS 2013
Commodity
2013 Rank 2007 Rank Change 2013 Tonnage 2007 Tonnage
CAGR Cont. Rate 2007 Cont. Rate 2013 Change
Textiles/leather
1
1
-
5,169,112
4,805,260
1.22%
97.49%
95.21%
-2.28%
Machinery
2
6
4
4,421,391
3,926,672
2.00%
96.01%
90.81%
-5.20%
Plastics/rubber
3
4
1
4,380,449
4,536,329
-0.58%
98.40%
97.46%
-0.94%
Electronics
4
5
1
4,060,202
4,179,234
-0.48%
97.02%
94.51%
-2.52%
Furniture
5
2
(3)
3,695,839
4,603,383
-3.59%
99.39%
99.05%
-0.34%
Articles-base metal
6
3
(3)
3,671,083
4,550,034
-3.51%
92.18%
89.03%
-3.15%
Nonmetal min. prods.
7
7
-
2,736,062
3,784,259
-5.26%
98.77%
67.23%
-31.54%
NEW YORK/NEW JERSEY TOP IMPORT COMMODITIES: 2007 VS 2013
Commodity
2013 Rank 2007 Rank Change 2013 Tonnage 2007 Tonnage CAGR Cont. Rate 2007 Cont. Rate 2013 Change
Other foodstuffs
1
1
-
3,328,963
2,858,415
2.57%
87.15%
89.53%
2.39%
Plastics/rubber
2
5
3
1,811,616
1,531,998
2.83%
98.49%
97.54%
-0.95%
Nonmetal min. prods.
3
2
(1)
1,743,109
2,043,613
-2.62%
82.24%
68.96%
-13.28%
Textiles/leather
4
3
(1)
1,683,341
1,699,453
-0.16%
97.72%
95.71%
-2.01%
Alcoholic beverages
5
4
(1)
1,544,785
1,604,170
-0.63%
96.64%
85.50%
-11.14%
Coal-n.e.c.
6
26
20
1,341,952
78,605
60.47%
9.61%
0.79%
-8.82%
Gasoline
7
28
21
1,293,845
53,282
70.17%
9.30%
0.71%
-8.60%
Import and export drivers vary from port to port.
26
Dimensions of Panama Canal locks and ships
Super
Session
Source: Panama Canal Authority
27
Existing market share
Super
Session
LA/LB % OF TRADE
NY/NJ % OF TRADE
Despite being further away (landside), LALB
generally maintains a higher level of market
share within the Midwest.
The US Midwest is an extension of
LALB’s expansive hinterland
•
These port’s maintain on average a 20-30%
share within this market
•
Volumes are predominantly North and
Southeast Asian (Trans-Pacific) and would not
“naturally” transit the Panama Canal
NYNJ is the gateway for lower TransAtlantic volumes
LA/LB IMPORTS
•
7%
12%
North Asia
•
Southeast Asia
All Other
•
North Asia accounts for the majority of volume
in NYNJ (41% of imports, 32% exports) which
suggests that this trade lane is currently being
extensively served but is predominantly
associated with the local Northeast market
Europe, the Mediterranean and South Asia
combined account for a similar share of
throughput
Expansion of the Panama Canal is not likely to
have an impact on these volumes
NY/NJ IMPORTS
10%
41%
8%
North Asia
Europe
Mediterranean
9%
South Asia
Southeast Asia
12%
All Other
81%
20%
Source: US Census Bureau, FHWA, Moffatt & Nichol
28
So. California ports are the low-cost logistics path to Chicago
Super
Session
SHIPPING COSTS* TO CHICAGO BY GATEWAY (FROM NORTH ASIA)
SHIPPING COSTS* TO CHICAGO BY GATEWAY POST CANAL
EXPANSION (FROM NORTH ASIA)
Post Expansion Scenarios
• California ports remain the “lowcost” gateways
• Larger vessels to the East Coast
are estimated to narrow the
competitive gap
• Panama Canal route is estimated to
be only marginally cheaper than the
Suez route
ASSUMED VESSEL SIZES (TEU)
Scenario
California
PNW
EC via Panama
EC via Suez
Base (Today)
13,000
9,500
4,500
9,500
Scenario 1 (Post PC Expansion)
13,000
9,500
13,000
13,000
Scenario 2 (Post PC Expansion)
15,000
19,500
13,000
13,000
As larger vessels call East Coast ports after the Panama Canal expansion is complete, the estimated advantage should narrow, but not
overcome, the competitive gap with West Coast ports.
Source: Moffatt & Nichol
29
Asia to US transit times
Super
Session
Representative Time (Median) in Days
Shanghai to Chicago
Days
Water Route
TransPacific
Suez
Panama
Port Region
Ocean
Dwell
Rail
Total
S. California
14
2
2.8
19
N. California
15
2
3.0
18
PNW
13
2
3.0
18
BC-Prince Rupert
12
2
3.5
17
BC- Vancouver
13
2
3.5
18
N. Atlantic
31
2
1.3
34
M. Atlantic
34
2
1.5
37
S. Atlantic
36
2
1.5
40
N. Atlantic
26
2
1.3
29
M. Atlantic
25
2
1.5
28
S. Atlantic
25
2
1.5
29
Prince Rupert & the PNW ports potentially offer the shortest transit periods from Asia to Chicago when compared to all-water services.
However, time is not the only factor impacting beneficial cargo owner route choices.
Source: Moffatt & Nichol
30
Competition from Canada
Super
Session
Aggressive pricing by the Canadian railroads have yielded strong growth in inbound rail cars into the Midwest. Prince Rupert in British
Colombia (BC) along with Canadian National (CN) pose a risk to US West Coast and Panama Canal-bound traffic
•
The inflection point in inbound rail traffic at International
Falls, MN in 2008/2009 coincides with the aggressive
pricing (as estimated be revenue per ton) of the rail
operations originating in BC. Broke from trend with USbased services.
•
These BC operations have targeted the US Midwest
markets
INBOUND RAIL CARS AT INTERNATIONAL FALLS, MN
CN SYSTEM MAP
AVERAGE REVENUE PER TON INDEX BY RAIL ORIGIN
International Falls, MN
Source: BTS, Public Waybill Samples, Moffatt & Nichol
31
Potential impact of near-sourcing to Mexico
Super
Session
APPAREL AND FOOTWEAR
ARTICLES OF IRON & STEEL
Source: BTS, US Census Bureau, Moffatt & Nichol
FURNITURE
Mexico has captured share in some consumer and industrialrelated commodities, a continuation of these trends could
reduce the growth of maritime trade between the US and China.
It is unlikely that all industries would migrate to the same
location as China becomes less of a primary offshoring
destination.
•
Relative to Mexico, China continues to dominate total trade in most
commodities (based on tonnage)
•
A sharp increase in market capture by Mexico is unlikely, given the
substantial manufacturing-related investments made in Asia over the
past two decades, however, continued trend growth gains in certain
commodities could be expected
32
What can the US competitively export?
TOP 10 HIGH POTENTIAL US NET EXPORTS*
Containerized
Score
Bulk/Breakbulk
Score
Wood Pulp Scrap and Waste
9.4
Oil Seeds (Soy
32.7
Oil Seeds (Soy)
1.1
Meat and Other Edible Animal Parts
28.7
Raw Hides and Leather
0.8
Cereal Grains
3.9
Cotton – Untreated, Yarn and Woven Fabric
0.7
Animal Feed
3.4
Animal Feed
0.7
Wood and Charcoal
0.4
Meat and Other Edible Animal Parts
0.3
Crude Oil and Refined Petroleum/Natural Gas Products
0.3
Plastic Feedstock and Manufactured Goods
0.2
Live Animals
0.2
Iron and Steel
0.1
Wood Pulp Scrap and Waste
0.2
Paper and Paperboard
0.1
Fish and Crustaceans
0.1
Chemical Products
0.1
Dairy Products, including Eggs and Honey
0.1
Cereals
0.1
Organic Chemicals
0.1
Organic Chemicals
0.1
Plastics Feedstock and Manufactured Goods
0.1
*Based on relative comparative advantage as defined by Bela Belassi
Agriculture, Capital Goods, Energy
Labor is more expensive and capital is cheaper in the US compared to fast growing emerging market economies such as China. The US
has comparative advantage (and competitive) advantages in the production of goods that use little labor. This is shown in the list of goods
that the US has been prone to export.
Source: US Census Bureau, Moffatt &Nichol
33
Asia is the dominant destination of US capital goods exports
US CAPITAL GOODS EXPORTS (MILLION METRIC TONS) BY DESTINATION
Asia
China
South/Central America
Europe
Africa
Australia and Oceania
North America
2003
34%
7%
26%
27%
6%
6%
1%
100%
2004
34%
8%
26%
25%
7%
7%
1%
100%
Source: US Census Bureau, Moffatt & Nichol
2005
32%
7%
27%
25%
7%
7%
2%
100%
2006
32%
7%
28%
25%
8%
6%
1%
100%
2007
31%
6%
29%
26%
7%
6%
1%
100%
2008
31%
7%
30%
24%
8%
5%
1%
100%
2009
34%
7%
31%
20%
9%
5%
2%
100%
2010
35%
7%
32%
19%
7%
6%
1%
100%
2011
33%
7%
32%
20%
6%
7%
1%
100%
2012
34%
7%
31%
20%
7%
7%
2%
100%
2013
34%
7%
32%
19%
7%
6%
3%
100%
2014
34%
8%
30%
20%
8%
5%
3%
100%
+/- Share
-0.4%
1.0%
4.4%
-6.9%
1.7%
-0.7%
1.9%
34
Asia is the dominant destination of US grains and oilseeds
US GRAIN AND OILSEED EXPORTS (MILLION METRIC TONS) BY DESTINATION
Asia - East & Southeast
China
South & Central America
Africa
Europe
North America
Middle East
Asia - South
2003
52%
11%
14%
13%
9%
9%
4%
0%
100%
Source: US Census Bureau, Moffatt & Nichol
2005
53%
10%
15%
14%
5%
7%
5%
0%
100%
2007
50%
10%
15%
14%
7%
6%
7%
1%
100%
2009
63%
21%
13%
9%
4%
7%
4%
0%
100%
2011
60%
21%
11%
11%
4%
7%
6%
0%
100%
2013
62%
34%
15%
7%
6%
7%
3%
0%
100%
2014
62%
30%
17%
6%
6%
6%
3%
0%
100%
+/- Share
10%
19%
3%
-6%
-3%
-3%
-1%
0%
35
Empty container availability is very poor in less urban areas
CONTAINER SHORTAGE INCIDENCE BY CITY
West
South Central
North-Central
East
Dry
Reefer
20ft
40ft
40ft High
Average
40ft
20ft
Average
New York
0%
0%
0%
0%
0%
0%
0%
Norfolk
0%
0%
0%
0%
0%
2%
1%
Charleston
0%
0%
0%
0%
13%
0%
7%
Savannah
0%
0%
0%
0%
8%
0%
4%
Minneapolis
45%
68%
25%
46%
100%
100%
100%
Chicago
0%
51%
13%
21%
2%
4%
3%
Cincinnati
0%
0%
0%
0%
4%
49%
26%
Columbus
0%
6%
0%
2%
8%
32%
20%
Kansas City
2%
51%
4%
19%
0%
42%
21%
Memphis
0%
2%
0%
1%
13%
100%
57%
New Orleans
11%
15%
19%
15%
11%
28%
20%
Dallas
0%
0%
0%
0%
2%
98%
50%
Houston
26%
49%
2%
26%
0%
8%
4%
Denver
0%
0%
0%
0%
55%
70%
62%
LALB
0%
0%
0%
0%
0%
0%
0%
Oakland
9%
0%
0%
3%
8%
4%
6%
Seattle
4%
0%
21%
8%
0%
8%
4%
Tacoma
0%
11%
25%
12%
51%
2%
26%
Average
5%
14%
6%
8%
15%
30%
23%
Exporters in areas of the Midwest that are not very urban have the least amounts of containers available. This hampers agricultural
exports that are best suited for containerization.
Source: US Department of Agriculture, Moffatt & Nichol
36
Small vessels also matter to trade and economic growth
TRIPS OF VESSELS WITH LESS THAN 13’ DRAFT – GULF
INTRACOASTAL WATERWAY
AVERAGE MONTHLY OILSEED AND GRAIN SHIPMENTS FROM THE NEW
ORLEANS CUSTOM DISTRICT BY DESTINATION REGION
Agricultural goods exported by ports in the New Orleans custom district go to destinations all over the globe. The average monthly
number of tons of dry bulk agricultural goods shipped to countries in various regions of the world are shown in the map below. The
average Caribbean country receives 17,000 tons of cereals, oilseeds and/or DDGs per month. Central American and Caribbean countries
receive shipments in a range that is best served through smaller capacity vessels.
Source: USACOE, USTO, Moffatt & Nichol
37
Major Trends
• State of the World
•
•
•
•
•
US economy has been the main driver of global economic growth since 2011
US economy at long term average activity levels but below potential output levels, the residential real estate market remains
restrained due to contractionary financial regulations
Europe is past its worst point but faces a long recovery period depending on the ECB’s success in implementing Quantitative
Easing and fiscal stimulus
Asian manufactured goods exporters have low domestic demand growth
Commodity export-driven economies will languish until Asian manufactured goods exporters regain growth momentum
• Key Uncertainties in 2015
•
•
•
Deflation is driven by excess commodity production capacity and automation as well as aging developed economy consumers
and insufficient demand in emerging markets
Federal Reserve is slated to start raising interest rates which may have a larger impact globally than domestically and is likely to
further increase the foreign exchange value of the US dollar
Commodity prices, oil in particular, will be weighed down by a strengthening US dollar but could get a boost from a surge in
global infrastructure investment
• Long Term Scenario Differentiators
• US trade deficit is unsustainable and a major risk to global growth
• China and other emerging market economies, as well as the US, need to maintain “Fordism” policies
No Fordism in China
China Emphasizes Fordism
US Infrastructure Investment
Medium growth, deflation risk
High growth, low inflation
No US Infrastructure Investment
Low growth, deflation risk
Medium growth, high inflation
38
Containerization Trends
EXPORT NON-ENERGY
IMPORT NON-ENERGY
Export and import tonnages have grown at CAGRs of 3.7% and 1.4%, respectively, since 2003. Containerization rates have increased
5% for both exports and imports. Export tonnage has generally been higher than import tonnage. What would happen to containerized
export volumes if the value of exports increased and container rates did not increase as much?
Source: US Census Bureau, Moffatt & Nichol
40
Divergent port quality trends
WORLD BANK PORT QUALITY INDEXES
BESIDES LARGER CRANES
7
6
US
Port quality Index
5
China
4
Brazil
3
2
1
0
2007
2008
2009
2010
2011
2012
2013
The World Bank Quality of Port Infrastructure measures business executives' perception of their country's port facilities. Data are from the
World Economic Forum's Executive Opinion Survey. Scores range from 1 (port infrastructure considered extremely underdeveloped) to 7
(port infrastructure considered efficient by international standards). China, the US and Brazil have been investing in port infrastructure but
the composition of the global vessel fleet may be changing faster than the port infrastructure is being upgraded.
Source: World Bank
41
Bigger ships require just-in-time terminal optimization
Simulation
KPI
Measurements
Scenario 1
3D Virtual Terminal
Real-World
Terminal
FlexTerm
Snapshot of
Current
Configuration
Simulation
KPI
Measurements
Scenario N
Historical Terminal
Operations Data
• Analysis of dynamic processes taking place in real time and space
• Experiments involving individual process or complex combinations of processes to verify productivities or compare alternatives.
• Confidence in investment to stakeholders / investors.
• Visualization of processes through animations
42
Deteriorating US inland infrastructure a serious problem
CHANGES IN SHARE OF CROP PRODUCTION: 1997 VS 2012
Hours of Lock Outages by Year and by Type of Outage
SHARES OF US GRAIN AND OIL SEED EXPORTS
New Orleans
Columbia-Snake
Seattle, WA
Los Angeles, CA
Norfolk, VA
Other
2003
2005
2007
2009
2011
2013
2014
+/- Share
61%
14%
8%
1%
1%
15%
100%
52%
16%
13%
2%
1%
16%
100%
51%
16%
11%
4%
2%
17%
100%
52%
15%
12%
3%
2%
15%
100%
48%
18%
12%
4%
2%
17%
100%
49%
20%
8%
4%
3%
16%
100%
52%
19%
8%
3%
2%
14%
100%
-8.7%
5.2%
0.2%
2.1%
1.9%
-0.6%
Soybean Transportation Coalition studied US inland waterways. Key points: 54% of the Inland Marine Transportation System’s (IMTS)
structures are more than 50 years old and 36% are more than 70 years old. Along with water issues probably, this has impacted where
grain is produced and exported. Grain increasingly moves on steel rivers (railways).
43