Franc Pigna CRE FRICS, Aegir/Drewry Ships Consultancy Managing Director

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  • 1. Opportunity Panama – For who? Who might the potential winners and losers be 19 April 2010 Opportunity Panama
  • 2. Summary • West versus East’: why, how & when? • Load centres: where? • Role Productivity will play: the great differentiator. • Port property: enhancing the port’s reach, intermodal and other competitive advantages. • The Caribbean & the ‘Cuba Factor’: ready, steady, go? 19 April 2010 Opportunity Panama
  • 3. Now for something totally different: What caused the political union of Great Britain? • England? • Scotland? • Panama? 19 April 2010 Opportunity Panama
  • 4. Scotland 1699? New Caledonia Hebrides? 19 April 2010 Opportunity Panama
  • 5. Never underestimate the Scots • 1699 Scotland bankrupt - Darien Scheme last chance for independence • Darien pass (today Panama Canal) their ace to Asian routes • Scotland bets future on Darien Scheme, turns into ‘Darien Fiasco’ • England offers to pay off debt if Scotland unites; she agrees as there is no hope left for independence. • Scotland’s Renaissance then starts by the Scots deciding to ‘out English the English’ • Scots responsible for UK’s industrial and economic growth and become major force in government. 19 April 2010 Opportunity Panama
  • 6. Why is PC Expansion Important? • Dramatically increase the flow of cargo via larger ships: to 12,500 TEU • Over water is far cheaper than over land • But, this does not mean that these class ships will immediately come to the East coast. • Nevertheless, average size will significantly increase to the 6,000 – 8,000 TEU in relatively near term 19 April 2010 Opportunity Panama
  • 7. How soon and large the shift? WEST VERSUS EAST 19 April 2010 Opportunity Panama
  • 8. West versus East • Shift started well before the Panama Canal (PC) expansion – Shift in mfg base in Asia & increased Suez use – Drewry: ‘up to 25% over ten years’ • West coast won’t take this lying down – Ports and RR’s to price aggressively – Crossing the PC will not come cheap • Four more years to prepare 19 April 2010 Opportunity Panama
  • 9. Where will they be? LOAD CENTRES ON THE COASTS 19 April 2010 Opportunity Panama
  • 10. East & West Coast Load Centres • Will require depth, bridge clearance and terminal capacity • West: Los Angeles/Long Beach & Seattle/Tacoma • East: the race is on! 19 April 2010 Opportunity Panama
  • 11. North Atlantic • Ports of New York & New Jersey: but they have an air draft problem at the Bayonne Bridge (need at least 180 feet of height and currently have approximately 156); but there will be a solution. • Hampton Roads is ready to go now. 19 April 2010 Opportunity Panama
  • 12. The race is for third place in the South Atlantic • Larger ships will have two to three calls, most probably three • Will need deep reach into hinterlands ; therefore significant intermodal capability 19 April 2010 Opportunity Panama
  • 13. South Atlantic Contenders Comparative Costs to Operate a 6,000 & 8,000 TEU Container Ship from Ocean Buoy to General Port Area and Return Port Hampton Roads Charleston Savannah Jacksonville Mobile Distance from ocean  buoy 18.0 15.0 32.3 21.0 28.0 Approximate depth of  channel 50’ 45’ 42’ 41’ 40’ NM from ocean buoy ‐ return 36.0 30.0 64.6 42.0 56.0 Ship operating hours  required 3.60 3.00 6.46 4.20 5.60 Hinterland(?);  Intermodal but being  Channel depth and width  No land, channel depth  Challenges None channel depth;  developed ; steaming distance and width steaming distance  Terminal capacity? Yes Yes Yes Yes Yes 19 April 2010 Opportunity Panama
  • 14. The new role it will play PRODUCTIVITY 19 April 2010 Opportunity Panama
  • 15. The new differentiator • US ports are less productive than Asian/European ie, 25 - 30 moves per hours (containers) versus 45 (therefore need more cranes or faster productivity here) • Port performance, handling speed and reliability will be critical to gain market share • Opportunity for second tier ports 19 April 2010 Opportunity Panama
  • 16. From an administrative to a strategic asset PORT PROPERTY 19 April 2010 Opportunity Panama
  • 17. Port property – the new strategic asset • 8,000 TEU ship requires 100 acres to keep container flow inbound smooth; most large ports are land constrained. • Throughput per acre is key to making customers happy and money eg, in US about 4,000 – 5,000 TEU/acre yet in Europe and Asia 10,000 TEU/acre and higher is not unusual 19 April 2010 Opportunity Panama
  • 18. Port property – intermodal and value added services • Intermodal capabilities are increasingly critical for viability of port transport nodes in order access hinterlands required by larger ships • As transport costs increase (fuel, manning, etc – about US$ 50,000 to $60,000/day for an 8,000 TEU ship), local, value added service become increasingly attractive to shippers – requires land and facilities 19 April 2010 Opportunity Panama
  • 19. Ready, steady, go? THE CARIBBEAN & THE ‘CUBA FACTOR’ 19 April 2010 Opportunity Panama
  • 20. Caribbean transhipnment • As East coast ports grapple with capacity and capability issues , transhipment becomes a viable alternative to feed the Gulf and Eastern seaboard ports • Transhipment ports are in Panama, Freeport, Puerto Rico and Jamaica • Cuba is the wild card going forward 19 April 2010 Opportunity Panama
  • 21. Cuba’s Ports 19 April 2010 Opportunity Panama
  • 22. Cuba’s Ports First tier: Second tier: • Habana • Mariel • Cienfuegos • Matanzas • Santiago de Cuba • Isabela de Sagua • Antilla • Nuevitas • Felton • Manzanillo • Nueva Gerona 19 April 2010 Opportunity Panama
  • 23. Cuba – strategic advantages • Location: strategically located - no deviation from major trade routes • Cost: major cost advantage compared to Jamaica and Panama (PR barred by Jones act) • Hinterland: largest Caribbean hinterland – 13M, who haven’t imported anything in the last 45 years • Depth: natural ports with deep water; one greenfield site with purportedly 200m. 19 April 2010 Opportunity Panama
  • 24. Cuba - Challenges • Infrastructure: similar to a 1970’s Third World country eg, Habana has two key cranes, only one operating until it was repaired (1996) • BUT: this lack of infrastructure may turn out to be an advantage; think Germany and Japan after WWII 19 April 2010 Opportunity Panama
  • 25. Cuba: transhipment port to Gulf ports? Control Depth Less than 6 feet 6 to 20 feet 20 to 45 feet 45 to 75 feet More than 75 feet 19 April 2010 Opportunity Panama
  • 26. What might happen from a trade standpoint? • Puerto Rico could be an example ie, transhipment from there to Jacksonville and Miami during the last several decades; but this is now changing as well. • Feeder transhipment node to the Gulf ports? • Will American ports allow anything transhipped from Cuba though? 19 April 2010 Opportunity Panama
  • 27. But, there is a possible alternative role • Major strategic issue facing major lines: How to service secondary trades? An opening for Cuba? • Transport must be through a node; currently it is Panama (balboa and Cristobal). Could it become Cuba in the future? 19 April 2010 Opportunity Panama
  • 28. But what about the changes in the industry taking place? • Consolidation of ship size from 4.5k TEU to 8.5k TEU due to massive scrapping taking place. • Increase to larger ships by lines – 10k TEU to 12.k TEU, requiring 2 to 3 stops & the expansion of East Coast US ports, limiting transhipment? • Less moves the better! 19 April 2010 Opportunity Panama
  • 29. When and by how much? • East coast port volumes may not warrant larger than 8,000 TEU ships for some time • Size range to US East coast will therefore be from 6,000 to 8,000 TEU • New load centre ports will open the door for specialist second tier ports which might be able to deliver faster, better and cheaper service 19 April 2010 Opportunity Panama
  • 30. When and by how much? • Trade form Latin America and Europe should grow, in many cases where 8,000 TEU +/- sized ships will not e in service for some time to come, if ever • Secondary ports (eg, Port Manatee) might be able to offer direct service with ‘value added capabilities and hinterland access for expedited, more direct serivce. 19 April 2010 Opportunity Panama
  • 31. Conclusion Panama and opportunity is knocking on your door! 19 April 2010 Opportunity Panama
  • 32. Thank you Helping you navigate the world of port properties Aegir Port Property Advisers +1 305 423 7711 +1 305 423 7712 F www.aegirports.com info@aegirports.com 19 April 2010 Opportunity Panama