Shifting International Trade Routes

Transcription

1 Shifting International Trade Routes 15 January 2009

2 Agenda Today s Objectives Economic Situation Supply Chain Assessment The Global Container Fleet North American Container Market Shifting Trade Patterns Questions for the Container Shipping Industry 1

3 I. Today s Objectives Endeavor to provide a broad context for today s program by: Reviewing the North American economic situation and short-term outlook Touching on the affects of today s economy on shippers supply chains Assessing the status of the global and North American container markets Providing some observations Asia-North American container routing alternatives Most importantly, finish on time! 2

4 3 II. Economic Situation

5 4 The Darkest Hour is..

6 5 Just before things go pitch black!

7 US Market Fundamentals The consumer is two thirds or more of the US economy When consumers sneeze, the economy catches the flu 6

8 The consumer is under substantial pressure Financial Bail Out Looming Tax Increases Credit Crunch Weakening Dollar Rising Health Care Costs Baby Boomers Retiring Energy Prices Weak Housing Market Rising unemployment Consumer Spending 7

9 The U.S. market fundamentals Emergence of China Cheap and plentiful money Housing boom fueled consumption and negative savings rate Strong economic growth Unbridled optimism Today Housing slump Financial crisis No money or unaffordable money Unemployment Confidence crisis Spreading to the global economy 8

10 U.S. income and consumption levels have grown steadily while savings have declined Index of US Personal Consumption, Personal Income, and Personal Savings ( ; 1980=100) Consumption Savings Income Source: BEA; Norbridge analysis CAGR ( ) Consumption 6.4% Income 6.1% Savings -1.5%

11 U.S. employment is increasing and expected to peak in 2009 U.S. Unemployment Rate History and Projections 8% 7.2% 7.4% 6.9% Unemployment Rate (%) 7% 6% 5% 4% 3% 2% 4.4% 4.6% 4.7% 4.9% 5.1% 5.6% 6.2% 6.0% 1% 0% Q Q Q Q Q Q Q Q Source: US Dept. of Labor and The Federal Reserve Board

12 U.S. private inventories (non-government) have been growing steadily since 2003 U.S. Private Inventories ( ) Billions of US Dollars Source: BEA

13 U.S. private fixed investment (nonresidential) began to level off in 2008 US Private Fixed Investment Nonresidential ( ) Billions of US Dollars Source: BEA

14 US Dollar s Long-term Decline 13 Dollar down 39% vs Euro over 7 years 1.1 $ vs Yen $ vs CDN $ $ vs Yuan $ vs Euro US Dollar Indexed Value, (July 01 = 1.0) Jan-09 Oct-08 Jul-08 Apr-08 Jan-08 Oct-07 Jul-07 Apr-07 Jan-07 Oct-06 Jul-06 Apr-06 Jan-06 Oct-05 Jul-05 Apr-05 Jan-05 Oct-04 Jul-04 Apr-04 Jan-04 Oct-03 Jul-03 Apr-03 Jan-03 Oct-02 Jul-02 Apr-02 Jan-02 Oct-01 Jul-01 Note: Noon buying rates. Source: Federal Reserve Bank of New York.

15 US exports A Modest Bright Spot U.S. Exports Y/Y Change in % Value (Nominal) 30% 25% 20% 15% 10% 5% 0% 2007 Total Jan 2008 Feb 2008 March 2008 April 2008 May 2008 June 2008 July 2008 Aug 2008 Sept 2008 Oct Source: U.S. International Trade Commission.

16 The US economy is projected to struggle in 2009 and into 2010 US recession Change in Real GDP (Percent) 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% 2008 meltdown '08 Q1 '08 Q2 '08 Q3 '08 Q4 est 2009 F/C 2010 F/C 2011 F/C -6.0% 15 Spreading worldwide US recession expected to be relatively deep and long Consumption (70% of US GDP) expected to recover slowly Europe and Asia also impacted Source: BEA historical data; recent estimates for Q4 08; EIU forecasts (Dec 08).

17 China dominates North American container trade 20% Size and Growth of North America Container Trade Regions ( ) CAGR 15% 10% 5% 0% % Change (Millions of TEU) China Bubble radius is 2007 TEU throughput China N. Far East SE Asia N. Europe C. America Mediterannean Caribbean Indian Subcontinent ANZ ECSA 16 Source: AAPA; Port Authorities; Norbridge research and analysis

18 China and India rapid GDP growth has come to at least a near-term end... 35% Year-over-Year China, Japan, India, and EU Historical and Projected GDP Growth 25% 15% 5% -5% -15% China Japan India EU United States 17 Source: Eurostat; World Bank, Global Insight, BEA

19 US imports from China are decelerating US import growth from China is down sharply Y/Y Change on $ Value of Imports from China Y/Y change in $ value (nominal) 30% 25% 20% 15% 10% 5% 0% 29.4% 23.7% 18.3% 12.6% 6.4% YTD 18 Note: Customs value of U.S. Imports For Consumption YTD is through October. Source: U.S. International Trade Commission.

20 So How Full is the Glass? Hall Full The severity of the challenges is universally recognized The Federal Government appears committed to turning the tide Fed actions Financial bail out??? Auto bail out???? Infrastructure spending Acquiring toxic debt Half Empty The lead indicators have probably not bottomed out Consumers are saving, not spending The Federal Government deficit spending will take time to make a difference Bankruptcies will continue Unemployment will rise It is not a question of if the economy will improve, but when 19

21 So when is when? 2009 will be a very difficult year The economy will likely to begin recovering in 2010 It will likely be 2011 before the global economy and trade are back on the tracks 20

22 21 III. Supply Chain Implications

23 We live in challenging times Addressing risk in the global supply chain How to live with congestion, high fuel prices, driver shortages, volatile exchange rates, disease, political uncertainty Fuel, in the longer-term threatens to rewrite supply chain economics 22

24 Supply Chain Responses Tough, shifting environment Supply chain moves Sourcing Making Moving Integrating 23

25 Twelve Key Responses Sourcing Making Moving Balance supply and demand by world regions Find sources closer to home Seek situations where far-shoring still works Mitigate risk Maximize plant utilization Move closer to market Increase exports Integrating Downshift modes slower sailing Revise DC network and flow paths Create a more agile distribution system Raise visibility and collaboration across the supply chain Promote sustainability that drives productivity 24

26 Agility is needed to confront today s challenges Dual sourcing on key items Plant and DC redundancy Postponement strategies Ops analytical team 25

27 26 Global Container Fleet Trends

28 The increasing supply of large container ships poses challenges Number of Vessels 4, Vessel Capacity (TEUs, millions) 1, % of Active Fleet Active On-Order Laid-Up Active On-Order Laid-Up 27 Note: January Various sources.

29 Container shipping industry responses More partnering Slow steaming: originally to reduce fuel costs, now to absorb capacity Lay-ups Postponing deliveries New deployment strategies: potentially web networks with more port to port operations 28

30 29 North American Container Market

31 North American container traffic has reversed sharply North America Ocean Container Traffic Growth ( E) TEUs (Millions) Canada US CAGR: 7.3% : 0.3% E: -5.8% (E) 30 *Note: Excludes AK, HI, Guam and Puerto Rico (largely domestic) traffic Source: AAPA; Port Reported Throughput; Norbridge Analysis

32 West Coast container imports are down Major West Coast Port Container Traffic Growth (YTD 2008 vs 2007) 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Imports Exports -20% Seattle Tacoma Vancouver Oakland Long Beach Los Angeles 31 Note: Seattle is January to October data (International containers only). Tacoma is January to November data (International full containers only). Vancouver is January to November. Los Angeles is January to November (full containers only). Oakland and Long Beach is January to October data (full containers only). Source: Journal of Commerce; Port authorities; Norbridge analysis

33 East Coast container traffic: Mixed in 2008 Major East Coast Port Container Traffic Growth (YTD 2008 vs 2007) 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Imports Exports Overall No Change Halifax Montreal PANYNJ Hampton Roads Savannah 32 Note: Hampton Roads is imports and exports (January to October). New York-New Jersey is January to October. Montreal is January to November. Savannah is January to November. Halifax is January to June. Source: Port authorities; Norbridge analysis

34 33 Are Trade Patterns Shifting?

35 There were 72 services between Asia/India and North American during 3Q08 Total Number of Services & Average Weekly TEU Capacity by Year to North America from India, SE Asia, N Asia, and China North Asia/China, SE Asia, India 34 Source: Com Pair Q

36 The Pacific Coast remains the dominant gateway for Asia-North American Traffic North Asia/China Number of Services & Average Weekly TEU Capacity by Year by First North American Region of Call 35

37 In 2005, the U.S. container port industry was viewed as nearing capacity Trade was growing at 7+% LA/LB had experienced a reported meltdown The western U.S. railroads faced major bottlenecks: power, crews, track capacity Industry growth reportedly equated to one new container port per year 36

38 Since numerous projects have come on-line or are in progress Prince Rupert: Phase 1: 500K TEU Evergreen Tacoma Norfolk New APMT terminal: 1M TEU Mobile: New term: 350K TEU Savannah CT-9 Bayport Phase 1 Jacksonville MOL & Hanjin Lazaro Cardenas Phase I: 700K TEU Tampa 37

39 There are numerous projects currently in the planning stage Prince Rupert: Phase 2: 1.5M TEU NYK, SSA Tacoma Vancouver Terminal II Melford, Nova Scotia 1.5M TEU Long Beach New Pier S 198 Acres; TEU TBD Los Angeles TraPac Redevelopment Corpus Christi Charleston, SC Navy Base Terminal 1.3M TEU Jacksonville Hanjin Lazaro Cardenas Fut. Phase: 2M TEU Tampa 38

40 The North American rail industry continues to spend $4- $6 billion per year on infrastructure and capacity North American Intermodal Network UP BNSF KCS CSX NS CP FEC CN 39 Source: Norbridge analysis of US National Transportation Atlas Data, 2005 (US DOT).

41 Asia-US Atlantic Trade 2008 volume of nearly five million TEU is a peak Handled by 15 major shipping lines through six major gateways Six strings of 10,000 TEU ships could handle what sixteen strings carry today Twelve strings could handle the 2018 volume at an average 5 percent growth per year 40

42 41 Container Shipping Industry Questions

43 Will the US container trades return to 7% annual growth or is 4-5% the new norm? How will shippers supply chain strategies evolve? What will the container shipping industry look like in 2012? What will the North American rail network look like in 2014? 42