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Published on October 22, 2007

Author: Danielle

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Slide1:  Trade & Transportation: Logistics and Supply Chain Challenges Atlanta, Georgia May 25th, 2005 Presented by: Ben Hackett Analytical Services Division Agenda:  Agenda Factors Affecting The Supply Chain Economic Factors Trade Infrastructure and Logistics Factors Slide3:  China’s Export-led Trade Growth has been Fundamental to the their Economic Success The U.S. is expanding bilateral & regional Free Trade Agreements, reducing barriers to increased trade:  The U.S. is expanding bilateral & regional Free Trade Agreements, reducing barriers to increased trade The U.S. makes strong demands on labor and environmental issues but the U.S. will not truly open its agriculture sector. Slide5:  World Containerized Trade Volume Typically Grows Much Faster than the World Economy (Percent change) North America Imports from Asia Grow, But Not As Fast:  North America Imports from Asia Grow, But Not As Fast TEUs Annual Pcnt Change CHINA: container exports to the world will continue to grow at double-digit rates – NAFTA country share hits 48% this year. :  CHINA: container exports to the world will continue to grow at double-digit rates – NAFTA country share hits 48% this year. TEU exports climb by 17.4% in 2005. China’s imbalanced trade is mostly due to United States China’s Importance as U.S. Trade Partner Jumps:  * China’s Share of U.S. Merchandise Trade with Asia, Percent of Value China’s Importance as U.S. Trade Partner Jumps China is increasing share as the source of container imports into the U.S. – especially for the West Coast.:  China is increasing share as the source of container imports into the U.S. – especially for the West Coast. China was 32% of West Coast imports in 1995. Now China is 58% of US West Coast imports. China’s share could go to 68% by 2008. China was the source of 41% of all imported TEUs in 2004. United States West Coast U.S. Container Imports, Million TEUs China affects Coastal Distribution of U.S. Imports:  China affects Coastal Distribution of U.S. Imports Growth in all-water route traffic has only dampened growth in West Coast port share Slide11:  India’s trade with U.S.: export growth slows from last year and import growth turns positive (Percent change in tonnage) Bottom Line – Trade growth milder in 2005:  Bottom Line – Trade growth milder in 2005 Trade growth is supported by continued economic growth. Exchange rates and congestion temper growth on some lanes. China remains key for continued import demand and export supply. 2005 should be a relatively strong year for most countries’ imports and exports – but not as good as 2004. Trade in lighter weight, higher value products will outpace growth in bulk commodity categories, meaning more containerized trade, and more pressure on container ports and intermodal transport. Transportation infrastructure and logistics problems continue to impede trade flows and force adjustments in supply chains. Logistics Accounts for 8.4% of Sales Cost:  Logistics Accounts for 8.4% of Sales Cost Source: Herbert W. Davis & Co. 2004 Infrastructure and logistics enable or hinder trade growth with problems found in many places:  Infrastructure and logistics enable or hinder trade growth with problems found in many places Ports and Maritime Terminals Throughput capacity limited from operational and physical constraints Inland Rail and Truck Transport Infrastructure Off-dock rail terminals near ports require truck drayage Inland intermodal terminals Expansion constraints and operational problems from high utilization Railroad networks are not dynamic enough to adjust In U.S. and Canada, western rail networks lacking capacity N. American / European trucking capacity problems Congestion and increased regulation (e.g. HOS, emissions) reduce productivity of existing truck fleets and drivers Lean logistics practices Using trucks and terminal storage as warehousing; Cost shifting Panama Canal’s Container Traffic on the Asia – U.S. East Coast Route is Booming :  Panama Canal’s Container Traffic on the Asia – U.S. East Coast Route is Booming 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 TEUs Source: ACP Asia – U.S. Canal Container Volumes Have Increased at a Compound Annual Growth Rate of 30% in Last Five Years But the Canal Is 95% utilized Consequences of transport and logistics problems for merchandise trade growth:  Consequences of transport and logistics problems for merchandise trade growth The velocity of international supply chains will continue to slow, raising total delivered costs. Cost increases pressure retailers and other importers to re-align sourcing for cost minimization, including shifting between country-of-origin for supply. Importer revisions to supply chains will be gradual as many of the investments and resources already committed are not easy to change overnight. Increased costs passed through to customers affect spending on imports and ultimately economic performance through changes in trade. Panama Canal is the key to the All Water Route from Asia to U.S. East Coast, but near capacity:  Panama Canal is the key to the All Water Route from Asia to U.S. East Coast, but near capacity Total Canal container volumes increased 22% in FY 2003 over previous year; Over 94% of available transit reservation slots are now taken. 43% of Canal transits are now made by vessels at or near Panamax size ( > 100 ft. width). Canal expansion plans are now for adding locks to handle a new generation of Post Panamax vessels of 10,500 TEU in size Expansion cost estimates range from $4 –$8 billion The Canal Authority says it can be financed from revenues If the Canal can’t expand or expand soon enough, a real bottleneck to trade will occur, causing diversion. Canal traffic is up significantly while capacity is not (yet). Panama Canal Expansion Plans are Advancing, yet Final Funding and Approval are Still Not Certain:  Panama Canal Expansion Plans are Advancing, yet Final Funding and Approval are Still Not Certain TRUCK-FREIGHT FLOWS Truck-freight system moved 11 billion tons valued at $9.5 trillion over 2.6 trillion ton-miles in 2000:  TRUCK-FREIGHT FLOWS Truck-freight system moved 11 billion tons valued at $9.5 trillion over 2.6 trillion ton-miles in 2000 Tons (millions) Slide20:  RAIL NETWORK TRAFFIC All Services Combined The Rail Network Needs Serious Investment and Improvement in Productivity.:  The Rail Network Needs Serious Investment and Improvement in Productivity. congestion at major rail interchanges (Chicago, Memphis, New Orleans) The Supply Side of Container Transportation:  The Supply Side of Container Transportation Containership Order-Book:  Containership Order-Book Large amounts of capacity on order for 2005/06/07 delivery, and already substantial capacity on order for 2008 Post-Panamax orderbook at 95% of fleet; Panamax orderbook at 50% of fleet in terms of capacity Dealing with the Cyclical Nature of Trade when Managing the Supply Chain is a major Challenge!:  Dealing with the Cyclical Nature of Trade when Managing the Supply Chain is a major Challenge! Decline in 2nd half of 2004 due to diversions and missed voyages during worst of congestion Ability for further diversion limited to other West Coast capacity, intermodal capabilities and Distribution Centers Port Productivity Needs Serious Attention in the U.S.:  Port Productivity Needs Serious Attention in the U.S. Source: APL The Port Interface is One Key Challenge That Must Be Faced:  The Port Interface is One Key Challenge That Must Be Faced More than 150 x 8,000-9,200TEU vessels due in East-West trades by 2008 Most ports ill-equipped for larger vessels Longer vessel turn times (up to 5 days); increased berthing delays, terminal congestion Flow impact on intermodal network: 4,000 containers discharge = 2,000 truck moves + 10 stacktrains x 200 containers The ‘Surge Factor’ impact of 8,000TEU+ vessels has not been properly planned for and caught everyone by surprise, here and in Europe. Summarizing the Supply Chain Challenges:  Summarizing the Supply Chain Challenges Trade growth remains robust putting pressure on the system Challenge of short term decisions to ship via different ports and different coasts, as well as via Panama or Suez Port labor productivity and way of working needs to change to accommodate the changing nature of vessel supply Rail needs to make major investments for their intermodal business Supply chain velocity will slow further Importers need to rethink and adjust their supply chains, but much of the investment has been made and resources already difficult to change in the short term. Higher costs will begin to flow through to consumers, ultimately impacting inflation and consumption. Slide28:  Contact: Ben Hackett Global Trade & Transportation Global Insight Ben.hackett@globalinsight.com Thank You!

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