Factors Influencing the US Economy

Report
Stephen Fitzroy
Economic Development Research Group, Inc.
www.edrgroup.com
1

Vessel Economics and Operations

Suez Canal and US West Coast Competition

Caribbean Transshipments

Competition from Canadian and Mexican Ports

Measures of US Port Capacity

Changes in Landside Logistics

US Energy and Export Policy

What We Should Expect
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Google Maps, April 2014
3
All Other Routes
East Coast U.S. Canada-Oceania
East Coast S. America-West Coast…
U.S. Intercoastal
Europe-West Coast U.S./Canada
East Coast U.S.-West Coast C. America
South America Intercoastal
Europe-West Coast S. America
East Coast U.S.-West Coast S. Ameerica
Northeast Asia-East Coast U.S.
0
10
20
30
40
50
Tonnes (millions)
4
60
70
80
90

Lower Relative Costs for Containerized Cargo
Between Northeast Asia and US East Coast
 Major shifts of container volumes to US East Coast

Greater Export Opportunities for US Bulk
Commodities
 Larger bulk vessels lower US costs

Increased US Container Port Capacity
 More surge capacity, more calls

More Demand for Landside Road, Rail and
Distribution Center Capacity
 Move containers to inland markets
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
Move to larger vessels (13,000 to 18,000TEUs)
driven by operating costs and thin profit margins
 Savings can range from 40% to 60% per “slot”
compared to 5000 TEUs and under.

Cascading has already begin – moving larger
vessels into current rotations

New Alliances (P3, G6, CKYH(E) and Chinese
lines) forming quickly
 Members will consolidate loads on larger vessels
 Fewer calls, but larger volume discharges
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 Vessel Operating Costs:






Capital costs
Manning (labor)
Fuel use for main (HFO) and auxiliary (MDO) engines
Stores and lubes
Maintenance
Port costs, insurance, etc.
 Maximum Economic Vessel Calls
 Three to four after passing through canal
 Discharge Rates – Number of TEUs
Loaded/Unloaded
 Larger vessels (13k to 18k) discharge 8k to 10k per call
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Source: Mercator International, Panama Canal Expansion Study, June 2012
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
Larger vessels (up to 18,000 TEUs) will begin
calling of US West Coast ports this year.
 13,000 TEU vessels will begin calling on NY and VA
Ports in 2014Q3
 US East Coast will be served by Suez from Asia
 Railroad pricing margins for mini-land bridge operations

Pooling of cargoes by alliances will accelerate
this trend

Operating cost will decline well before Panama
Canal expansion is complete
9

Canadian ports, especially on West Coast, have
drawn a large share to US-bound Cargo
 Productivity and connections to US Midwest are keys

Mexican ports are emerging as low-cost
alternatives
 Less congestion and strengthening rail links to Central
US markets

Emergence of manufacturing and “near-shoring
in Mexico may combine with lower labor costs to
stimulate shipment of intermediate goods
through Mexico
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
Marine transshipment hubs function in several
ways:
 Like the air hub and spoke system – allows for more
efficient operation of larger vessels based on smaller
feeders
 Vessel loads can be reconfigured while cargo is in
transit – very important for logistics management

Costs for transfers are low relative to US ports

Locations are directly on routes to/from Panama
Canal and US East Coast or Europe
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Mariel
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
Navigational Channel Depth/Vessel Capacity
 Only New York, Jacksonville and Houston exceeded
50%

Berth Capacity
 Charleston (47%) and Savannah (74%) exceeded 50%

Crane/Lift Capacity
 Savannah exceeded 50%

Container Yard Capacity
 New York, Virginia Ports, Miami and Houston exceeded
50%

Gate Capacity and Chassis Availability
Source: Container Port Capacity Database, U.S. Army Corps of Engineers, 2010
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
Panama Canal Tolls

Transshipment Costs

Port Charges

Terminal Operator Costs

Rail Transportation Costs

Drayage and Chassis Management

“Net” Cost Savings Accruing to Shippers 0 ≤
? ≤ $100
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
More On-Dock Rail, Intermodal and Inland Port
Operations Supporting Major Container Ports
 Accommodate surge loads and expand market access
 Greater emphasis on value-added logistics services

Intensifying Use of Transload Facilities At or
Near Ports
 Convert cargo from 40-foot international to 53-foot
domestic loads

Accelerating Trend Towards both Larger and
Smaller Distribution Centers
 Larger DCs near ports to redirect imports
 Smaller regional DCs to handle same-day fulfillment
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
Trade Agreements Affect Volumes and Prices
 TPP (Trans-Pacific)
 TTIP (Trans-Atlantic)
 Bi-Lateral (Columbia, South Korea, Panama)

Commodities Most Likely Affected:
 Agriculture
 Corn
 Soybeans
 Energy
 LNG
 Natural Gas Liquids
 Coal
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
Likely

 Cascading to larger
container vessels
Unlikely
 Big savings for shippers
 More rapidly than expected, but
not due to the Panama Canal
 More competitive US
Exports
 Driven by reduced costs for
deep draft bulk vessels and
emerging LNG/Energy
 More emphasis on
logistics and supply chain
innovations
 To handle container surges in
larger ports)
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 Most captured by TSPs
 Major Shifts of
Containerized Cargoes
to US East Coast
 Re-shoring of
“traditional”
manufacturing
 Near-shoring may shorten
supply chains for US
 Major highway
investments
 Alternatives – Rail/Barge
should be considered
Contact: Stephen Fitzroy
[email protected]
For a copy of this presentation and other EDR Group
Presentations:
http://www.edrgroup.com/ited2014
To access the library of past EDR Group Papers,
Projects and Presentations:
http://www.edrgroup.com/library
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