Expanding Global All-Water Trade Routes · 2008. 6. 18. · 4 • APL’s 160 year perspective on all-water routes and rail o Pioneering spirit by industry, government, leaders, citizens

1

James G. CarrickDirector, Marketing & Logistics, TransPacific Trade, APL

Wednesday June 18, 2008Marriott Waterfront, Harborside BallroomBaltimore, Maryland

Expanding Global All-Water Trade Routes:Implications for U.S. Ports and

Inland Transportation

A Container Liner’s Perspective

2

APL Company Overview

• Celebrating 160 years this year

• Today operates a modern world class fleet of more than 135 vessesls

• More than 4,000 employees in 200 offices in more than 80 countries

• Provides worldwide container transportation to more than 25,000 locations in 140 countries on 6 continents using comprehensive global network of nearly 50 linehaul vessel services routes, marine terminals, trains and trucks

• WWW.APL.COM

3

APL’s Global Service Network

4

• APL’s 160 year perspective on all-water routes and railo Pioneering spirit by industry, government, leaders, citizens

o “Game Changers”

• Trade route drivers & trends (past 10 years)o Transit time-distance to market vs. money issueso Asia trade has been the keystone to U.S. trade growth

• Current environment & outlook (next 10 years)o Asia trade will remain center stage, but with increasing need for more

diversified delivery routes

o Infrastructure and productivity issues

• New “game changers” ……. next 20 – 50 yearso Panama Canal expansion

o Fuel costs & environmental concerns (e.g. carbon emissions)

o What else?

Expanding U.S. - Global All-Water Trade Routes

51848 1855 1867 1869 1869 1914 1924 1956 1961 1977 1979 1984 1988 1996 2007

APL’s 160 Year Perspective

1848: Predecessor company, Pacific Mail Steamship Company,

incorporated by State of New York to carry mail from Panama to Oregon

territory

Game changer called “Gold Rush” in 1849

1855: Company’s founder constructs 1st rail road across

the isthmus

Game changer: Cuts travel time from New York to San Francisco from 60 days to 21 days

1867: PMSC steamer Colorado sails for Japan

from San Francisco inaugurating first regular service to Yokohama and

Hong Kong

1869: Transcontinental

Railroad completed

Game changer: New York to

San Francisco in 7 days

1914: Panama Canal opens

1924: The President Harrison inaugurates Dollar Line’s round-

the-world service through Suez

1869: Completion of the Suez Canal

The President Harrison

1977: APL terminates round-the-world

ending USEC port calls

1961: APL shifts towards containerization

1956: Containerized ocean transportation

is born1984: APL introduces

pioneering “double stack” train technology with compelling operating economic and service

model

1979: APL ushers in modern era of containerized

intermodal rail with first dedicated express

LinerTrainTM across U.S.

1996: APL reintroduces all-water service to USEC

after nearly 20 years

1988: APL introduces the world’s first “Post-Panamax” containerships (C10 Class),

committing its future fleet to the West Coast intermodal

model

2007: APL reintroduces regular U.S. flag Suez

service after more than 30 years. “Post-Panamax”

C10 is now seeing the U.S. East Coast for the first time!

6

Trade Routes Drivers

• Transit time (since 1849!)• “Time is money”, especially for high value goods• Growth and addition of more vessel service loops

allows for more and more direct “port-pair” specific service & faster transit

• Comparative advantage• Unique materials or process expertise• Labor cost

• Infrastructure constraints• Population: Consumption centers

• Transportation cost

TechnologyManufacturing/agriculture centers

7

Trade Route Drivers • Distribution Decisions (semi-fixed)

• Wharehouse locations or availability• Deconsolidation / Domestic distribution scheme• ‘Customer’ demands or requirements

• Transactional• Rail costs (few providers)• Ocean carrier pricing scheme (hugely competitive)• Infrastructure costs (Alameda corridor, Pier Pass, Canal tolls)• Environmental assessments• ILWU / ILA bargaining power• Congestion delays (unplanned) – port/rail

• Offshore intra-region labor rates (e.g. Thailand vs. Philippines vs. Vietnam)

• Interest rates (trade financing terms)

(continue)

8

Outer arrow1 = 2007 volumeInner arrow1 = 1997 volume

Note 1. scaled to volume

Asia to West Coast

Asia to East Coast via All Water Service

Europe to East Coast

Latin Americato West Coast

Europe toWest Coast

Expanding Global All Water Trade Routes

Latin Americato East Coast

U.S. container trade import trends (past 10 years)

Source: PIERS statistics, container cargo

9

U.S. Container Trade Import Trends (Past 10 Years)

0.0

2.0

4.0

6.0

8.0

10.0

Asia Europe Latin Total

19972007 0.0

2.0

4.0

6.0AsiaEuropeLatinVolume by Source Region

(in Million Feu)

Volume Growth

(in M

illio

n Fe

u)

0%

50%

100%

150%

200%

AsiaEuropeLatinTotal

(Gro

wth

Per

cent

ages

)

Growth Percentages

U.S. container imports increase 3-fold from 3.3 million Feu to

9.2 million Feu


80% of growth originates from Asia

10


1997

USEC/Gulf share of U.S. container import market, while growing 19% (*CAGR) over 10 years,

nevertheless has gained little share from USWC


37%63%

40% 60%

2007

West Coast East Coast / Gulf

*CAGR: Compound Annual Growth Rate 1997 - 2007

11

0%

20%

40%

60%

80%

100%

WC EC

19972007

Europe

0%

20%

40%

60%

80%

100%

WC EC

19972007

LatinAmerica

WC = U.S. West Coast; EC = U.S. East Coast & Gulf

Asia West Coast Gateway volume Share of Total Asia Import declines 10 percentage points over past years (1997 ~ 2007)

0%

20%

40%

60%

80%

100%

WC EC

19972007

Asia

83%73%

27%17%



WC EC WC EC WC EC1997 83% 17% 9% 91% 13% 87%2007 73% 27% 12% 88% 14% 86%

Asia Latin AmericaEuropeWest & East Coast Gateway Volume Split

12

Import Volume Growth

While the East Coast has seen less aggregate volume growth over past 10 years, that long term trendmay be changing

60% of the USEC & Gulf Gateway volume growth of 2.51 million Feu originates from Asia



3.29

0.100.07

3.47

1.51

0.60

0.40

2.51

0.0

1.0

2.0

3.0

4.0

U.S. West Coast U.S. East Coast / Gulf

Asia Europe Latin Total

(in M

illio

n Fe

u)

13

-5%

0%

5%

10%

15%

20%

25%

30%

Past 10 Years CAGR 2007 '08 YTD

Total WC EC Panama Suez

Asia to U.S. Y-o-Y GrowthY

-o-Y

Vol

ume

Gro

wth

Rat

e

Source: PIERS statistics (’97 thru ’07), container cargo; 2008 forecast (company research data)

Panama

Suez

East Coast

West Coast

Total

Past: Past 10 Years, CAGR

’08 YTD: Jan - Apr

Past 2007 '08 YTDTotal 13.3% 1.5% (6.4%)WC 11.7% (0.9%) (10.8%)EC 19.3% 8.7% 6.4%Panama 21.5% 5.7% 0.7%Suez 15.0% 21.6% 28.9%

14

Aggregate Volume Growth from Asia

Source: PIERS statistics, container cargo; 2008F: company forecast

SuezPanama

WC

EC

Total

-50,000

0

50,000

100,000

150,000

200,000

Suez Panama

WC

EC

Total

-110,000

-60,000

-10,000

40,000

90,000

140,000

190,000

Vol

ume

(Feu

)

Vol

ume

(Feu

)

2007 Vs. ‘06 2008F Vs. ‘07

West Coast volumes are declining

15

Current Environment

10%

9%

11%

49%

55%

APL figures

36%

31%

80%

67%

All carriers* * Intermodal Association of North America (IANA)

U.S Inland Story (APL Experience)

16

Current Environment & Outlook (Next 10 Years)

• Asia will remain the engine for container imports

• India Subcontinent / Latin America / Eastern Europe hold promise for alternate sourcing but hard evidence of a major shift absent

• Panama infrastructure a constraint for next 7-10 years

• U.S. marine terminal and rail infrastructure congestion has been well documented

o 2007 - 2008 import slow down has provided temporary “reprieve” providing a window of opportunity for “catch-up”

17

Port Productivity Comparisons

Falling Farther Behind

*Compound Annual Growth RateSource: TransSystems, CI Database, Seaports of the Americas, Port Data

Port Productivity Comparisons

U.S. Asia

Seattle/Tacoma 25-28 Tokyo 35

Los Angeles 25-28 Shanghai 28-30

New York Harbor 25-28 Hong Kong 30

Savannah 30 Mumbai 20-24

Marine Terminal Crane Moves per Hour (GMPH)

18

22.0

25.0

28.0

31.0

34.0

Mar-04 Jul-04 Oct-04 Jan-05 May-05 Aug-05 Dec-05 Mar-06 Jul-06 Oct-06

BNSF UP Linear (BNSF) Linear (UP)

U.S. Intermodal Train Speed

U.S. Intermodal Productivity

• U.S. Intermodal Productivity

• Railroad investment

• Heartland corridor project ($266 million)

$2.45 Billion

$1.43 Billion$1.60 Billion

$3.10 Billion2008

BNRR

NSCSX

UPRR

Mile

s pe

r hou

r

Source: AAR

19

Heartland Corridor Project

2010 Completion Target

20

• Suez alternate route being developed meantime

o APL’s Suez Express

o Asia sourcing via Suez

• USEC port development to provide alternative gateways moving ahead relatively slowly

Current Environment & Outlook(continue)

21

APL’s - Suez Express Service (Westbound to U.S.)

Suez Canal

22

Asia Sourcing via Suez

(2,000)

3,000

8,000

13,000

18,000

Vietna

mInd

ones

iaTh

ailan

d

China

Malay

sia India

Bang

lades

hSin

gapo

rePa

kistan

Sri L

anka

Othe

r

Ranked by 2007 Volume Growth Rate

Asia to U.S. East Coast & Gulf via Suez Canal

(Volume in Feu)

2007 Vs. 2006

Gro

wth

Vol

ume

(Feu

)


Rank Country 2,006 2,007 Var. Growth1 China 1,899 10,753 8,854 466%2 Vietnam 11,237 28,712 17,475 156%3 Indonesia 24,478 38,234 13,755 56%4 Malaysia 15,403 23,895 8,491 55%5 Thailand 29,314 40,843 11,528 39%6 Singapore 5,670 7,476 1,807 32%7 Banglades 16,832 21,551 4,719 28%8 India 137,264 142,209 4,945 4%9 Pakistan 46,666 46,991 325 1%

10 Sri Lanka 14,056 12,273 (1,783) (13%)Other 23,073 23,510 436 2%

Total 325,894 396,446 70,552 22%

23

Major U.S. Container Gateways

Seattle/Tacoma

Portland

Los Angeles /Long Beach

Oakland

HoustonNew Orleans

Boston

PhiladelphiaNY / NJ

Miami

Jacksonville

Savannah

Baltimore

Norfolk

Wilmington

Charleston

24

U.S. Port Working Depths

U.S. East Coast MLWBoston 38’New York / New Jersey 43’Philadelphia 38’Baltimore 40’Norfolk 48’Wilmington 42’Charleston 47’Savannah 42’Jacksonville 38’Miami 39’

U.S. Gulf MLWHouston 40’New Orleans 35’

U.S. West Coast MLWLos Angeles / Long Beach 50’Oakland 50’Portland 35’Seattle / Tacoma 50’

Depths at Mean Low Water (MLW)

25

Panama Canal expansion

New Game Changers

2008 2015Length 965’ 1,400’Beam 106’ 180’Draft 39.5’ 60’

26

Panama Canal Expansion

Comparison between the largest Panamax container vessel that can transit the current Canal and a Post-Panamax size vessel with 12,000 TEUs container capacity. The larger vessel has 2.5 times the cargo carrying capacity of the Panamax vessel.

27

World Containerized Trade: Impact of Larger Vessels on Infrastructure

Order Book by Size Range (% of Capacity at January 2008)

2008 and Beyond will see more large vessels and 31% of the teu capacity coming on-board will be 10,000+ teu type of ships

28

Fuel costs and environmental concerns as drivers of future trade route patterns require

thought & planning

New Game Changers

29

Historical Comparison of Crude Oil vs Bunker Fuel Price

$210

$260

$310

$360

$410

$460

$510

$560

May

-05

Jun-

05Ju

l-05

Aug

-05

Sep

-05

Oct

-05

Nov

-05

Dec

-05

Jan-

06Fe

b-06

Mar

-06

Apr

-06

May

-06

Jun-

06Ju

l-06

Aug

-06

Sep

-06

Oct

-06

Nov

-06

Dec

-06

Jan-

07Fe

b-07

Mar

-07

Apr

-07

May

-07

Jun-

07Ju

l-07

Aug

-07

Sep

-07

Oct

-07

Nov

-07

Dec

-07

Jan-

08Fe

b-08

Mar

-08

Apr

-08

May

-08

$49

$59

$69

$79

$89

$99

$109

$119

$129

$139

Bunker Fuel Cost per Ton Cost of Oil Per Barrel

Bun

ker

Fuel

Cos

t per

Ton

Cost of O

il per Barrel

• Oil hit an all-time high of $139 on June 6, 2008• Oil prices* are likely to hit $150 a barrel this summer• Oil prices* may shoot up to $200 within the next two

years as part of a "super spike."

*Goldman Sachs Forecast

30

Cost Per Unit: MLB Vs. All Water @ $340/MT

$1,050

$2,500

$0

$1,000

$2,000

$3,000

$4,000

WC - 5 Ships EC - 8 Ships

Round Trip Cost 1R/T Rail Cost WC – NYC

Note 120% fuel surcharge

Shipment of a Forty-foot Equivalent Unit (FEU) from Asia to NYC

All figures are per Feu

2007 AprilBunker Fuel

$1,050

$3,050

$2,500

$0

$1,000

$2,000

$3,000

$4,000

WC - NYC EC - NYC

MLB > by $1,600/FEU

31

$1,400

$3,200

$0

$1,000

$2,000

$3,000

$4,000

$5,000

WC - 5 Ships EC - 8 Ships

Round Trip Cost 1R/T Rail Cost WC – NYC

Note 140% fuel surcharge

Shipment of a Forty-foot Equivalent Unit (FEU) from Asia to NYC

All figures are per Feu

2008 AprilBunker Fuel

$1,400

$3,800$3,200

$0

$1,000

$2,000

$3,000

$4,000

$5,000

WC - NYC EC - NYC

Cost Per Unit: MLB Vs. All Water @ $540/MT

MLB > by $2,000/FEU

32

Carbon Emission

0.2090.274

0.804

0.0

0.2

0.4

0.6

0.8

Deep Sea OceanVessel

Longhaul Rail Longhaul Truck

Source: The Network for Transport and the Environment; Container Shipping Information Service

CO2 Emission per teu-mile by Transportation Mode

Kg/

teu-

mile

33

Carbon Emission

2,1041,929 1,986

0

500

1,000

1,500

2,000

Ship/Rail (MLB) All Water viaPanama

All Water viaSuez

Source: BSR Intermodal Calculator Tool

Kg

/ TE

U(continued)

CO2 Footprint per TEUHong Kong to New York

34

Will the USEC Port and land infrastructure be

ready for the challenges posed come 2015 ?

35

• Ports on the East and Gulf Coasts and not the Panama Canal will become the functional limitation

• U.S. port capacity is only one important component of the U.S. intermodal infrastructure chain

• Industry/Federal/State & Local government funding, partnerships, leadership, & continuous communication critical!!

• Pioneering investment-development spirit still required …….

End Notes

36

Thank You!

37

Appendix

38

Transit Time to New York

Origin West Coast East Coast (Panama Canal)East Coast

(Suez Canal)

Hong Kong 21 30 27Singapore 26 34 24Nhava Sheva 33 39 19(Transit Time figures in days)

Via:

39

Transit Time to Savannah

(Transit Time figures in days)

Origin West Coast East Coast (Panama Canal)East Coast

(Suez Canal)

Hong Kong 24 28 30Singapore 29 32 27Nhava Sheva 35 40 25

Via:

40

2004 2005 2006 2007 2008

China 1.0 1.2 1.4 1.6 1.8India 0.9 1.1 1.2 1.3 1.5U.S. 22.9 23.6 24.5 25.2 26.0Eastern Europe

Czech Republic 7.6 8.6 10.1 12.0 12.6Hungary 6.8 7.5 8.0 9.4 9.9Poland 6.0 7.1 7.8 8.7 9.0Russia 1.3 1.7 2.1 2.4 2.7Slovakia 5.2 6.0 6.7 8.0 8.3Latin America

Brazil 3.5 4.7 5.5 5.4 5.5Mexico 1.9 2.0 2.1 2.1 2.1

Source: EIU, Company analysis

2004 2005 2006 2007 2008

China 9.0 9.0 8.6 7.3 7.0India 6.1 6.1 4.9 5.0 4.6U.S. 2.8 1.4 1.4 1.3 2.0Eastern Europe

Czech Republic 4.0 4.5 4.7 4.5 4.1Hungary 5.2 4.1 4.0 3.7 4.1Poland 3.0 1.0 3.2 3.4 3.1Russia 5.0 5.2 5.2 5.2 4.6Slovakia 5.1 3.9 3.9 4.0 4.5Latin America

Brazil 1.7 -1.4 1.4 1.4 1.2Mexico 2.3 1.2 1.7 1.5 1.3

Table 1: Projected Labor Costs Per Hour (US$) Table 2: Productivity Growth (%)

Comparative Labor Rates/Productivity

41

Regional Offshore Drivers

IndiaSubcontinent

Latin America

Europe

East Asia

2015F20071997

Source: PIERS statistics, Horizon forecast (2007 Winter), Company data

U.S. Container Cargo Import (Million Feu)

#CAGR: compound annual growth rates

6.6%

6.6%

3.4%

6.9%

2007 /2015CAGR*

42

Panama Canal• Operating at 95 – 98% capacity utilization• Reservations for vessel transit day being made one year in advance!!• Cannot handle ships larger than 5,000 TEU and completion of new locks

able to accommodate up to 12,000 TEU ships is not expected until 2015

Cross section of the new locks with its water saving basins, shown with a post-Panamax container vessel with a nominal capacity of 12,000 TEUs

43

Total Vessel Cost (Transpacific)2004

Fuel @ $186 / MTFuel @

$500 / MT

“Fixed Vessel Cost” is Not So Fixed

Fuel: $585/MTFuel: $585/MT(Average May (Average May ’’08)08)

44

End

Slide Number 1APL Company OverviewAPL’s Global Service NetworkExpanding U.S. - Global All-Water Trade RoutesAPL’s 160 Year PerspectiveTrade Routes DriversTrade Route Drivers Expanding Global All Water Trade RoutesU.S. Container Trade Import Trends (Past 10 Years)U.S. Container Trade Import Trends (Past 10 Years)U.S. Container Trade Import Trends (Past 10 Years)U.S. Container Trade Import Trends (Past 10 Years)Asia to U.S. Y-o-Y GrowthAggregate Volume Growth from AsiaCurrent EnvironmentCurrent Environment & Outlook (Next 10 Years)Port Productivity ComparisonsU.S. Intermodal ProductivityHeartland Corridor ProjectCurrent Environment & OutlookAPL’s - Suez Express Service (Westbound to U.S.)Asia Sourcing via SuezMajor U.S. Container GatewaysU.S. Port Working DepthsNew Game ChangersPanama Canal ExpansionWorld Containerized Trade:�Impact of Larger Vessels on InfrastructureNew Game ChangersHistorical Comparison of Crude Oil vs Bunker Fuel PriceCost Per Unit: MLB Vs. All Water @ $340/MTCost Per Unit: MLB Vs. All Water @ $540/MTCarbon EmissionCarbon EmissionSlide Number 34End NotesSlide Number 36Slide Number 37Transit Time to New YorkTransit Time to SavannahComparative Labor Rates/Productivity Regional Offshore DriversPanama CanalSlide Number 43Slide Number 44

Documents

Expanding Global All-Water Trade Routes · 2008. 6. 18. · 4 • APL’s 160 year perspective on all-water routes and rail o Pioneering spirit by industry, government, leaders, citizens