Transcript The Gathering Storm: China and the Trans

Logistics Session Part 2 - Transportation
Henry L. (Rick) Wen Jr.
VP Business Development & Public Affairs
OOCL (USA) Inc.
2006 AAFA International Sourcing, Customs & Logistics
Integration Conference
Savannah, March 22-24, 2006
Agenda
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Introduction to OOCL
Record trade growth from Asia and China’s
impact upon US transportation infrastructure
California Crisis-Shipping Landscape-How
cross industry collaboration improved results
Affect on cost and infrastructure investment
Future outlook and trends
Introducing OOCL
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Hong Kong’s largest container shipping
company
Grand Alliance member
Publicly traded and privately held
4M shipments & $4.7B in annual revenue
China expert
ISO certified and process driven
Technology Innovation – IRIS 2 & CargoSmart
Highest industry return on revenue in 2004
Green Flag Award environmental recognition
World Container Flow 2005
TRANS-ATLANTIC
5.4 million TEU
ASIA-EUROPE
12.2 million TEU
TRANS-PACIFIC
18 million TEU
5.3% Growth
10.9% Growth
10.4 % Growth
OTHER TRADES
North-South
19.2 million TEU
Intra-Regional
16.1 million TEU
INTRA-ASIA
33 million TEU
(including Australia,
Indian Subcontinent and
Middle East)
12 % Growth
Source: Drewry Consultants, 2005
China’s Share of U.S. Import Volume
China
15%
China
26%
Other
85%
1995
Other
74%
2000
Source: PIERS Trade Horizons
China
38%
Other
62%
2005
China’s Share of Trans-Pacific Imports
China
31%
Other
69%
1995
Other
50%
China
50%
2000
Other
34%
2005
Source: PIERS Trade Horizons
China
66%
China’s apparel & footwear trend
China market share China-US growth p.a.
Clothing
Footwear
Machinery
Electronics
Auto
Optronics
Furniture
Toys
Total
2003
11.7%
84.1%
29.0%
48.2%
6.7%
38.3%
64.6%
86.7%
40.4%
Source: US Census Bureau
2005
26.6%
86.0%
37.4%
55.1%
14.8%
50.3%
71.4%
90.4%
45.9%
2002-05
46.7%
3.4%
21.4%
12.7%
41.3%
19.2%
17.4%
6.1%
15.9%
Growth
2005
71.9%
3.9%
15.6%
10.2%
-0.6%
9.2%
13.7%
1.0%
11.5%
RoW-US growth 2005
y/y - excluding China
-0.5%
-4.1%
11.7%
4.5%
4.1%
-21.1%
4.2%
-3.4%
4.9%
Major Port Throughput
Major Port Throughput 1-3Q 2005(m Teus)
20
18
16
14
12
10
8
17.3
16.8
13.2
11.7
10.4
6
4
4.5
3.7
3.6
3.5
3.1
2.5
(figures include empties and transshipment)
Xi
am
en
Sa
va
nn
ah
zh
ou
ng
jin
Source: Drewry Shipping Consultants Ltd
G
ua
Ti
an
J
rk
/N
Yo
N
ew
N
in
g
bo
o
gd
a
B
Q
in
LA
/L
Si
ng
ap
or
H
e
on
g
K
on
g
Sh
an
gh
ai
Sh
en
zh
en
2
0
1.4
Volume Growth (m Teu)
2002
2003
2004
2005
02-05
2005 VS '04
Growth
LA/LB
NY/NJ
SEA/TAC
OAK
CHS
SAV
HOU
10.63
3.75
2.91
1.71
1.59
1.33
1.15
Source: Ports (Dec est.)
11.84
4.07
3.22
1.92
1.69
1.52
1.24
13.10
4.48
3.57
2.04
1.72
1.66
1.32
14.85
4.80
4.00
2.08
1.97
1.90
1.65
11.7%
8.6%
11.2%
9.3%
7.4%
12.6%
11.9%
13.3%
7.1%
12.0%
2.0%
14.5%
14.5%
25.0%
Projected Growth (POLA/POLB)
(in Million TEUs)
35
35
30
25
20
15
10
16.7
9.5
10.6
11.8
2000
2002
2003
5
5.4
0
1995
2010
Source: Marine Exchange of Southern California
2020
2004 California Crisis
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West Coast problem was compounded by many issues:
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Trade growth and inadequate customer forecasting
Shortage of longshore labor and lower productivity of new hires
Port congestion
State and Federal regulations
Intermodal equipment (railcar, locomotive) and crew shortages
Terminal crane capacity
Rail volume capacity (ramp, on dock rail limits, trackage pinch point
at Cajon Pass)
Strained truck capacity and limited trailer availability
Chassis shortage
Larger Mega Ships
Rising costs of doing business
9/
9/
20
04
9/
11
/2
00
4
9/
13
/2
00
4
9/
15
/2
00
4
9/
17
/2
00
4
9/
19
/2
00
4
9/
21
/2
00
4
9/
23
/2
00
4
9/
25
/2
00
4
9/
27
/2
00
4
9/
29
/2
00
4
10
/1
/2
00
4
10
/3
/2
00
4
10
/5
/2
00
4
10
/7
/2
00
4
10
/9
/2
00
10
4
/1
1/
20
04
2004 Labor Shortage
Vessel Gang Demand
Worked vs Ordered (Day)
200
180
160
140
120
100
80
60
40
20
0
Source: www.pmanet.org
Ordered
Worked
No. of In-Service
Cranes
Shipping Landscape
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New mega ships increase trade capacity
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Global trade growth outpaces United States infrastructure,
including port, railroad, trucking, terminal and warehouse.
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Congestion & delays reduce effective vessel capacity
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Panama Canal approaches 100% capacity
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Supply chains become pro-longed and segmented West
(intermodal) and East (all-water)
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Cross-industry collaboration and synchronized activities
improved shipment performance & efficiency after 2004 crisis
Here’s how:
2006 Port Congestion: Beyond 2006
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US Ports Lag International Productivity:
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Throughput (Teu) per gross acre:
 East
Coast /Gulf
4,100
 West Coast
4,600
 Major world ports 10,000 to 15,000
Port Terminal Capacity Constraint
Source: SSA
Million TEU
Port Terminal Capacity Constraint
Source: SSA
Million TEU
Cross Industry Collaboration:
Ocean Carrier and Terminal Action
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More labor, high capacity cranes and terminal
equipment (resources)
Convert from wheeled to grounded operations:
increase terminal capacity (space)
Extend Terminal’s Hours of Service “Pier-Pass”
appointment system to increase capacity (time)
 Implemented on July 23, 2005
 Over 30% of daily cargo moves during offpeak
 1 Million container milestone December 2005
Cross Industry Collaboration:
Ocean Carrier and Terminal Action
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Redeploy ships to East Coast and Pacific Northwest
ports to balance port capacity: (asset utilization)
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Reduce terminal free time from 5 to 4 days to accelerate
goods movement (velocity)
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Implement 1st receiving dates for exports to minimize
terminal congestion (space)
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Synchronize block stowage and promote on dock rail to
improve intermodal rail performance and maximize
terminal efficiency (congestion)
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Develop off-dock Container Yards to relieve terminal
congestion (overflow capacity)
Cargo Interest
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Order earlier and prepare to hold more inventory in
your pipeline
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Move information up your supply chain (at origin) and
available at least 24 hours prior vessel loading
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Align your delivery schedules with changes in the
international delivery process
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Focus more on time definite vs. time to market and
avoid “double dipping”
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Use “cost of goods sold” profit model (20 cents a kilo
vs. 6 dollars a kilo?) to build your supply chain
Value per kg of shipment
Clothing
Footwear
Machinery
Electronics
Auto
Optronics
Furniture
Toys
Total
Source: US Census Bureau
China-US freight(US$/kg)
2002
2004
14.4
12.4
7.2
7.6
6.6
7.8
7.0
7.3
2.5
2.4
11.6
11.1
2.3
2.4
4.8
4.7
5.2
5.4
2005
11.5
8.2
8.1
7.8
2.5
10.9
2.5
5.2
5.8
Increased Cost of Liner Shipping
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Bunker fuel and inland fuel
Additional labor
Terminal
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Equipment
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Extended operation hours
Wheeled to ground operation (expensive yard machinery)
Terminal appointment system
Storage charges have increased
Trade imbalance (import: export) increases empty repositioning
Cost of equipment is up as steel costs doubled
Carriers are building larger vessels but equipment supply lags
behind
Rail
Trucking
TSA Revenue Index Trending
Future Outlook & Trends
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Intermodal rail service improves
More “Hub and Spoke” shipments (inland distribution)
Less West Coast transloading
More East Coast distribution using trucks instead of rail
Integration of international with domestic transportation
 International intermodal outpaces domestic growth
 Railroads drive double stack intermodal
 Smaller and more frequent shipments favor container vs. trailer
 Cost and environmentally friendly for shipments >700 miles
Domestic infrastructure changes to accommodate international
 CPRR bans cross Canada intermodal trailers effective January
1st 2006 (others to follow)
 TTX converting 48’ car wells to 40’ wells
 New flatcar wells will be mostly 40’
Future Outlook and Trends
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Economy of Scale & Asset Utilization
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More and larger container vessels
More and larger consortia of carriers
More mergers and Acquisitions
Don’t put all your eggs in one basket
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Liner shipping logistics plays a more strategic role in
supply chain including domestic applications
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Technology drives standardized efficiency, shipment
visibility and Home Land Security applications
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Moving towards a global economy