Transnet’s Strategy For Managing Port
      and Intermodal Demands
 Presentation to the Annual Ports & Rail Conference
   ...
INTRODUCTION




  • Ports are critical enablers of a country’s competitiveness
  • Ports need to be oriented towards supp...
THE IMPORTANT ROLE OF PORTS




   • Ports provide the basic infrastructure foundation of a country’s international
     t...
PORTS ARE EVOLVING




 • The development of global supply chains coupled
      with globalisation of production and consu...
POOR INFRASTRUCTURE INCREASES LOGISTICS COSTS IN AFRICAN
COUNTRIES
    Cost to export (US$ per container)

               ...
THE CURRENT DOWNTURN IS BEING FELT IN THE INDUSTRY

                                                                      ...
SOUTH AFRICA CAN PLAY A REGIONAL ROLE IN CONTAINER TRADE
        Major trade routes and ports                             ...
7


...WHICH PROMISES ATTRACTIVE GROWTH                                                                              Base ...
THE PHYSICSAL CHARACTERISTICS OF A HUB


  • Hub ports must have the following physical
     characteristics:
      – Able...
9


SEVERAL COUNTRIES ARE CONSIDERING REGIONAL HUBS
Major Sub-Saharan African ports

  Major Sub-Saharan African ports

  ...
TRANSNET HAS A GROWTH STRATEGY


    • Transnet is a focused freight transport company, delivering integrated,
     effici...
TRANSNET IS FOCUSED ON INTEGRATED SUPPLY CHAINS




    Transnet ‘s growth strategy has 2 supply chain focus areas, namely...
INVESTMENTS AND OPERATIONS IMPROVEMENTS ARE FOCUSED
 ACROSS A NUMBER OF KEY CORRIDORS
                                    ...
TRANSNET IS IMPLEMENTING A HUB CONTAINER HUB STRATEGY




        • Transnet is actively pursuing a hub strategy, seeking ...
CONCLUSION




  • Ports are critical enablers of a countries competitiveness
  • Ports need to be oriented towards supply...
THANK YOU

            15
BACKUP


         16
17


STAKEHOLDER HAVE DIFFERING REQUIREMENTS

                            Objective                   Input factors
      ...
PORT USER REQUIREMENTS


                                             Industry research has identified the
               ...
PORT USER REQUIREMENTS



• What our research shows
        There is an expectation that a load centre will be developed
 ...
EVOLUTION OF HUB PORTS OVER THE LAST 30 YEARS




   Date    N. America Europe Asia Others        Total
   1970        9  ...
TRANSNET IS MAKING GOOD PROGRESS ON OPERATING
PERFORMANCE ACROSS ITS DIVISIONS
                                           ...
SEGMENTATION OF CONTAINER TRAFFIC

                                                                Transhipment business s...
CHARACTERISTICS OF WORLD CLASS PORTS




                                          Requirement                  South Afri...
SOUTHERN AFRICA IS EXPECTED TO BECOME MORE COMPETITIVE
WITH THE SUEZ, CREATING INTERLINING OPPORTUNITES




              ...
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Transnet Future strategies and meeting increasing expectations of port uses, in particular those concerning road/rail/port intermodalism demands

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Presented by: John Oosthuizen at the 2009 Railways and Harbours Conference in Cape Town.

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Transnet Future strategies and meeting increasing expectations of port uses, in particular those concerning road/rail/port intermodalism demands

  1. 1. Transnet’s Strategy For Managing Port and Intermodal Demands Presentation to the Annual Ports & Rail Conference CAPE TOWN 3RD TO 5TH MARCH 2009
  2. 2. INTRODUCTION • Ports are critical enablers of a country’s competitiveness • Ports need to be oriented towards supply chains to meet the changing needs of their customer base • Transnet has 2 supply chain focused strategies for ports and rail A corridor-focused strategy will align port and rail capacity and – operations Establishing a container hub will provide supply chain benefits to cargo – owners, to the Sub Saharan Region and to South Africa 1
  3. 3. THE IMPORTANT ROLE OF PORTS • Ports provide the basic infrastructure foundation of a country’s international trade and are the umbilical cord to foreign markets. Ports integrate with global supply chains • Ports represent physical infrastructure and facilitators of national supply chains. • Ports are a core component of national economic development and security – Efficient ports contribute to national competitiveness – Ports are springboards for the economic development of hinterlands – Ports are contributors to national economic, security, social and environment priorities Ports facilitate the efficient transportation of goods and hence international trade which is vital for economic welfare of the nation state 2
  4. 4. PORTS ARE EVOLVING • The development of global supply chains coupled with globalisation of production and consumption has changed the role of ports • The contribution of modern ports is more related to efficient distribution of products than the loading, unloading of ships and berth availability • Ports need to be oriented towards supply chains in order to meet the changing needs of their customers (shipping lines) and fullfil their new role in the supply chain management era¹ Sources 1. Panayides, Dong-Wook Song; Notteboom, Rodrigues, 2004 and related research 3
  5. 5. POOR INFRASTRUCTURE INCREASES LOGISTICS COSTS IN AFRICAN COUNTRIES Cost to export (US$ per container) 390 China Least cost – Global Mauritius 728 South Africa 1 087 Mozambique 1 155 Madagascar 1 182 • South Africa is Lesotho 1 188 2nd cheapest Tanzania 1 212 in Africa • China is best Namibia 1 539 in class and Malawi 1 623 the most cost Swaziland 1 798 effective Seychelles 1 839 Angola 1 850 Zimbabwe 1 879 Zambia 2 098 Congo, Dem. Rep. 2 307 Botswana 2 328 Source: Doing Business Database, World Bank survey June 2008 4
  6. 6. THE CURRENT DOWNTURN IS BEING FELT IN THE INDUSTRY Volumes have declined steeply Hong Kong Singapore • Global container growth averaged 10% over the last 10 -24% -13% years. However, for 2008 volume growth fell to 8% • According to Drewry* growth for 2009 is expected to Shanghai Shenzen be at 3.1%, recovering to 7% in 2011/12. -6% -16% • Global container volumes fell rapidly in December 2008. • The economic downturn is being felt in the shipping Major US Ports industry -7% Orders for new vessels are being cancelled with – consequent loss of deposits made Year on Year Container Volumes (TEU) Excess vessel and port capacity exists – Comparing Nov to Jan for 2007/08 and 2008/09 400 Thousands Sea freight rates have plummeted – 350 300 250 200 150 Nov Dec Jan Feb Mar 2007/08 2008/09 Sources: Drewry container forecast (December 2008), City Bank Company Focus (January 2009) 5
  7. 7. SOUTH AFRICA CAN PLAY A REGIONAL ROLE IN CONTAINER TRADE Major trade routes and ports Hub-and-spoke model Major trade routes and ports Hub-and-poke model Seattle Tacoma New York/New Jersey Oakland Hampton Roads Long Beach Charleston Port Said Savannah TanzaniaDar-es-Saalam Dubai Los Angeles Jeddah Nhava Sheva Luanda Salalah Mozambique Colombo Tomasina TEU Namibia Zimbabwe Less than 2 million Botswana Maputo Madagascar Walvis Bay 2 to 4 million Santos 4 to 7 million Melbourne South Africa Durban Cape Town Durban 7 to 10 million Port Elizabeth Ngqura More than 10 million • Additional economic activity originating from the hub will induce additional South African employment opportunities and stimulate growth economy • Increased national trade competitiveness (through economies of scale, scope, and density) • Total yearly supply chain cost savings Cargo • Improved service levels owners • Improved time to cargo owner • Increased maritime connectivity improves access to regional and global markets • Reduction in number of calls (2.7 in average today) Shipping • Optimisation of vessel utilisation (fewer stops and increased efficiency at hub) lines • Improved port efficiency, feasibility, and speed • New volume opportunities for incumbents and market entrants 6
  8. 8. 7 ...WHICH PROMISES ATTRACTIVE GROWTH Base estimates Additional potential Million TEU CAGR* X% South African gateway volumes 2020 SA port container volumes, million moves Definition Middle road forecast 2008 total 3.3 Low road forecast 25 Transnet 5-year plan Incremental 20 6% • SA import and export via direct vessel Gateway calls volumes to 2020 15 5% 10 2020 Gateway volumes 5 • Regionally based transhipment to/from Sub-Saharan 0 (low volume) SSA ports, employing African 2007 2018 2028 2038 feeder vessels Transhipment Total 10.2 Sub-Saharan Africa transhipment volume potential • Domestic transhipment to/from (low Domestic Middle road forecast TBD volume) SA ports, employing feeder transhipment 12 Upside potential vessels . . . 10% 10 • Trade route based transhipment at key Interline 8 network ports between deep sea (big 14% ships) vessel strings 6 Distribution • Cargo-generation by sea-port based 4 TBD Zone logistics zones serving an inbound and 2 outbound distribution network between 0 SA and SSA Total potential 2007 2018 2028 2038 * Compound annual growth rate Source: Transnet Demand Model; Global Insight; Transnet; Flynn Consulting
  9. 9. THE PHYSICSAL CHARACTERISTICS OF A HUB • Hub ports must have the following physical characteristics: – Able to serve vessels of up to 9000 TEU, minimum 16m water depth – Space to accommodate on-dock rail – Mega terminals of 300 acres – Long free time, long dwell times – Incentives for short sea shipping companies – Free from navigational congestion – Space for long-term expansion – High connectivity – Space for logistics/distribution activities • All global hubs face the issue of competition for space with cities. It is therefore important to factor social impact (road congestion, relocation of communities) and minimise environmental issues Source: Dynamar 8
  10. 10. 9 SEVERAL COUNTRIES ARE CONSIDERING REGIONAL HUBS Major Sub-Saharan African ports Major Sub-Saharan African ports TPT Other • Developing south-south trades, changing trade route dynamics and growing Sub Uganda Saharan volumes offers opportunities for Equatorial Lamu Guinea regional transhipments and interlining Mombasa Zaire Kenya Gabon Rwanda • Capacity developments are being Congo Burundi Dar-es-Saalam undertaken in many SSA countries (HPH) Tanzania Luanda • Several countries are considering hub Malawi Mozambique developments in spite of the current Angola Zambia economic situation Madagascar Tomasina Zimbabwe Namibia Port Louis • International terminal operators are Botswana Maputo (Mauritius) Walvis Bay pursuing opportunities in Sub Saharan Swaziland Africa Lesotho Durban South Africa Ngqura Cape Town Port Other hubs • Algeciras Elizabeth • Salalah • Accra
  11. 11. TRANSNET HAS A GROWTH STRATEGY • Transnet is a focused freight transport company, delivering integrated, efficient, safe, reliable and cost-effective services to promote economic growth in South Africa • This is to be achieved through increasing our market share, improving productivity and profitability and by providing appropriate capacity to our customers ahead of demand Focus on customers  Focused freight company  Deliver integrated, efficient, safe reliable services Efficient,  integrated Promote economic growth services  Improve productivity  Provide capacity Capacity Economic ahead of value-add demand 10
  12. 12. TRANSNET IS FOCUSED ON INTEGRATED SUPPLY CHAINS Transnet ‘s growth strategy has 2 supply chain focus areas, namely: • An integrated corridor strategy that aligns port and rail capacity and service delivery • A container hub strategy that delivers supply chain benefits to cargo owners and to the Sub Saharan Region, economic benefits to South Africa, and growth opportunities for Transnet 11
  13. 13. INVESTMENTS AND OPERATIONS IMPROVEMENTS ARE FOCUSED ACROSS A NUMBER OF KEY CORRIDORS Road/rail volume 2006 2026 16.4 46.1 Maputo 14.3 33.4 Richards Bay corridor Richards Sishen • Coal Expansion • Dry bulk terminal Bay • Multi-purpose terminal Durban Saldanha 43.3 109.3 East London • Ore Line expansion Natal Corridor • Container terminals Port • Island View refurbishment • Agriport expansion 72.7 171.5 Elizabeth • Maydon Wharf Cape Town refurbishment • Automotive 12.0 29.4 Cape Corridor • General Freight • Container terminal • NMPP pipeline expansion replacement • MPT refurbishment South corridor • Ngqura construction • Ngqura Container Terminal • Manganese 12 Source: Transnet Freight Demand Model
  14. 14. TRANSNET IS IMPLEMENTING A HUB CONTAINER HUB STRATEGY • Transnet is actively pursuing a hub strategy, seeking to grant the South African economy access to the global markets and lowering the cost of doing business in South Africa • To that effect, it will start operations in Ngqura, as the port ideally placed to attract transhipment cargoes through state of the art operations and facilities and deep draft, thus offering an effective initial base for hub activity • Transnet will continue the development of existing ports to satisfy the market ahead of demand in the spirit of a complementary port system • In the short term Transnet will focus on the following areas: – Provide capacity by focusing on efficiency and maximising the use of existing assets – Engage with customers and other stakeholders – Source seed volumes for the hub 13
  15. 15. CONCLUSION • Ports are critical enablers of a countries competitiveness • Ports need to be oriented towards supply chains to meet the changing needs of their customer base • Transnet has 2 supply chain focused strategies for ports and rail A corridor-focused strategy will align port and rail capacity and – operations Establishing a container hub will provide supply chain benefits to cargo – owners, to the Sub Saharan Region and to South Africa 14
  16. 16. THANK YOU 15
  17. 17. BACKUP 16
  18. 18. 17 STAKEHOLDER HAVE DIFFERING REQUIREMENTS Objective Input factors Stakeholder • Service availability / reliability • Minimise logistic cost Overall economy • Cargo volumes / balance • Capacity (cargo owners) • Efficiency / operating cost • Capacity of land infrastructure • Maximise profit • Location / centrality Shipping & • Connections Logistics • Possibility to expand companies • Network efficiency • Minimise intrusion • Visual Civil society • Pollution/environment • Energy use • Land use • Employment • Economic benefit Government • Value added • Strengthens human capital • Cultivates maritime / logistics clusters • Capital / infrastructure • Maximise value creation Transnet • Efficiency/ operating cost • Pricing/ revenue Source: Transnet Hub team
  19. 19. PORT USER REQUIREMENTS Industry research has identified the factors that most affect port attractiveness, namely: • Shipping line requirements • Centrality index Location / centrality • Draft – • Berth availability Connectivity – • Port costs Potential for expansion – • Service availability / reliability (Eg. Nautical services) Network efficiency – • Port reputation • Cargo owner requirements • Speed of vessel turnaround • Dock worker relationships Service availability / reliability – • Potential for a dedicated terminal Cargo volumes / cargo balance – • Cargo volume • Cargo balance Efficiency / operating cost – • Import / export cargo balance Capacity of landside infrastructure – • Feeder connections • Inland truck and train services • Network efficiency 18
  20. 20. PORT USER REQUIREMENTS • What our research shows There is an expectation that a load centre will be developed – Improved performance has generated tangible goodwill – However, to be competitive as a hub, significant further improvement is necessary – Good connectivity is essential – Call for a clear signal from Transnet – • What our customers are saying Evidence of commitment to improved service – (Just) achieving targets – Better than many other terminals – Need to improve efficiency – 19
  21. 21. EVOLUTION OF HUB PORTS OVER THE LAST 30 YEARS Date N. America Europe Asia Others Total 1970 9 12 2 2 25 1980 7 6 8 4 25 1990 5 5 13 2 25 2000 3 6 14 2 25 20
  22. 22. TRANSNET IS MAKING GOOD PROGRESS ON OPERATING PERFORMANCE ACROSS ITS DIVISIONS 2003/04 2005/06 2007/08 Growth in key commodities Key Performance Indicators Net ton km per wagon (GFB) Total freight (billion vol.km) 106 9.9% 105 105 105 103 681,684 620,204 Rail 100 2003/04 2007/08 2002/03 03/04 04/05 05/06 06/07 2007/08 Container moves per crane hour – Container Containers (Thousand TEUs) Terminals 3,717 25.6 3,400 22.6 22.0 Currently 25 3,010 18.2 15.8 2,864 14.7 Ports 2,528 Cape Town 2003/04 04/05 05/06 06/07 2007/08 Durban Port Elizabeth Refined (million Ml/km) Percent capacity utilization 3.4 104.9 95.7 3.1 76.7 70.0 68.4 2.8 2.8 Pipe- 51.4 2.5 lines Refined Crude Gas 2003/04 04/05 05/06 06/07 2007/08
  23. 23. SEGMENTATION OF CONTAINER TRAFFIC Transhipment business segments Definitions • SA import and export via direct Gateway vessel calls traffic • Regionally based transhipment Hub-and- to/from (low volume) SA ports, spoke T/S SA employing feeder vessels. … • Regionally based transhipment Hub-and- to/from (low volume) SSA ports, spoke T/S employing feeder vessels. SSA • Trade route based transhipment at Interlining/ key network ports between deep- relay traffic sea vessel strings • Cargo-generation by seaport-based SSA distribution zones SSA distribution zone 22 Source: Team analysis
  24. 24. CHARACTERISTICS OF WORLD CLASS PORTS Requirement South Africa’s new port (Ngqura) • Draft at berth • 16.5m • Deep water berths accommodate • Rail and road connectivity • Intermodal transport linkages larger vessels (+14m draft) • Marine services • 24 hour operations • On time berthing • Highly productive terminals with • Can accommodate larger • 8 000 – 9 000 TEU’s vessels can well trained staff, high-end vessels berth systems and high waterside productivity(>25 moves) • Good waterside • >3 cranes per vessel • >25 moves CGH • Good hinterland infrastructure performance and connectivity • Good, integrated land • Fast turnaround to hinterland • High levels of security and safety transport (incl. Gauteng) • Capacity ahead of demand • Capacity ahead of demand • Capacity expected to exceed demand until 2012 23
  25. 25. SOUTHERN AFRICA IS EXPECTED TO BECOME MORE COMPETITIVE WITH THE SUEZ, CREATING INTERLINING OPPORTUNITES 24

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