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Panama Canal: Winners and Losers?
IEDC Leadership Symposium
Vann Cunningham, BNSF Railway Co., January 2015
Population Growth Spurs Freight Demand
2
by 2050
nearly
100 million more people
2/3/2015 3
Overall Cost Effectiveness Comparison
Rail vs. Other Freight Transportation Modes
Freight Rail Market | Import/Export
4
of BNSF Units are imports and exports
30% More than
Drivers • Most port departures • More delivery
options • Agile to markets
& environment • Increasing match-
back solutions
Flexibility for Reach and Response
Trade
Growth
Continues
in Both
Directions
Transpacific TEU Trade Growth 2014 - 2018
The West Coast Competitive Advantage
Import Volumes & Transit Times
Savannah
Charleston
Norfolk
New York
Houston
Seattle/Tacoma
Los Angeles / Long Beach 25
25
26
China
12
24
Ocean Transit Days
13
To scale of Asian Imports
Suez
Panama
Chicago
5
4
Rail Transit Days
Canada
5
28
Suez
12
Hofstra University and BNSF Economic Development
Kansas City
West Coast Competitive Advantage
3
Memphis
3
4
4
Atlanta 2
5
5
3 DFW
7
U.S. West Coast
4.1M TEUs
U.S. East & Gulf Coast
1.9M TEUs
Southeast U.S Coast
0.9M TEUs
Northeast U.S Coast
0.8M TEUs
U.S. Gulf Coast
0.2M TEUs
Source: PIERS, Global Insight 2013, Asia
Container Exports favor West Coast Ports
OVER 2.2 TIMES WEST COAST PORTS HANDLE
MORE CONTAINERIZED EXPORTS THAN EAST AND GULF COAST PORTS
7
8
CORPUS CHRISTI
BALTIMORE
NORFOLK/ NEWPORT NEWS
MOBILE NEW ORLEANS
LOS ANGELES / LONG BEACH
SEATTLE / TACOMA
KALAMA
PORTLAND
HOUSTON 12 – 7 M ST
15 – 13 M ST
33 – 25 M ST
60 M ST
Non-containerized Exports favor Gulf
Source: PIERS, FY 2010; all world destinations
50% OF NON-CONTAINERIZED VOLUME MOVES THROUGH Gulf Ports
Journal of Commerce 1-6-15 9
TEU Capacity
Cost Factor 4,600 11,000
% of Capacity
Head-haul loaded 85 85
Back-haul loaded 30 30
Round Trip Cost Per Ship
Current $723,120 NA
2016 $710,700 $1,542,715
Reduction ($12,420) NA
Savings 1.72% NA
Average Cost Per Container
Current $136.00 NA
2016 $134.00 $122.00
Savings Per Container ($2.00) $12 or 9.2%
2016 Panama Canal Toll Cost Effects
10
Implications for Freight Logistics
Most likely to lure back container services from Asia that carriers switched to the Suez Canal route to take advantage of lower slot costs for the post-Panamax ships that can use that route.
Shipping line CEOs are cautious, indicate they have to assess the new toll structure before they decide on making the switch back to the Panama route.
Time sensitive, higher value container traffic will continue to favor West Coast Ports.
Existing Bulk shipping trends are likely to be reinforced.
11
Implications for Economic Development
Industrial and Distribution Facilities
Growing demand for Space around Seaports and Inland Ports
Access to direct rail, transload, and intermodal service more important for manufacturers
Export Oriented Manufacturing – bulk processors and high value product manufacturers
Import Oriented Firms - Emerging Megaregions and Supply Chain Integration determine future Distribution Center location behavior