CALIFORNIA ASSOCIATION OF PORT AUTHORITIES

Transcription

1 CALIFORNIA ASSOCIATION OF PORT AUTHORITIES T«EøÖ Ä P Ä Ã C Ä ½ Ä T«C ½ ÊÙÄ PÊÙã CÊÃÖ½ ø JçÄ 2016

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3 California Ports, Our Nation s Leading Maritime Gateways When the Panama Canal opens its new, larger set of locks, it will bring a new dimension of trade route options to the global maritime shipping industry. The new locks will be able to accommodate container vessels 160% larger than the 5,000 Twenty-Foot Equivalent Unit (TEU) maximum size vessels that traverse the original Gatun, Pedro Miguel and Miraflores locks today. The $5.25 billion expansion project will allow ships with a capacity of up to 13,000 TEUs to transit the Canal and double the throughput capacity from 14,000 to approximately 28,000 vessels annually. 1 Yet, the impact of the widened Panama Canal on California ports specifically is not projected to result in significant diversions of discretionary container cargo volumes away from West Coast maritime destinations. The port complex of Long Beach and Los Angeles, the largest in the United States, benefits from both global geography supported by a world class goods movement infrastructure to remain the most vital end point for Asian maritime trade with the United States. There are a number of factors and variables that will influence the degree of impact the widened Canal will have on California ports, including: Shorter transit times from Asia through the U.S. West Coast to the Midwest and southeast; The largest vessels in international shipping exceed the maximum size of the new Panama Canal locks; Current trends point towards use of larger container vessels into the future; West Coast container ports have the infrastructure to service the largest vessels with efficient rail and truck intermodal connectivity; Chinese economic slowdown could moderate new container routing through the Panama Canal in the near-term.

4 Discretionary Cargo Much of the cargo entering the United States is discretionary. Shippers have the discretion to select U.S. ports-of-call for arriving cargo and utilize the efficient intermodal rail and truck system to transit the cargo to the final destination, often well beyond the local port community. Some beneficial cargo owners ensure cargo is routed to market through a variety of ports in order to minimize the impact to overall cargo delivery of any disruptions in the goods movement system. For example, some cargo owners utilize a four corners strategy for shipping to the United States by routing cargo through the Pacific Northwest, California, the Southeast and the Northeast. This is certainly true with containerized cargo and with the opening of the new Panama Canal locks, shippers will have enhanced options. Cargos of lower dollar value may be more susceptible to diversion to the increased efficiency of the Canal all-water route. EVERYDAY, WE ARE DEMONSTRATING THAT ENVIRONMENTAL SUSTAINABILITY AND ECONOMIC PROSPERITY ARE TWO SIDES OF THE SAME COIN. OUR ABILITY TO INVEST IN INNOVATIVE IMPROVEMENTS, IS UNMATCHED. JON SLANGERUP, CEO The Competitiveness of California s Ports Today The California public port complex consists of 11 ports with various cargo and goods movement specialties. Among the smaller ports within the system, automobiles, fresh fruit, aggregates, metals, construction materials, windmill components, wood products and foodstuffs are among the specialty cargos. Including liquid and dry bulk cargos, the California public ports moved over 386 million tons of cargo in These cargo volumes move through California ports that are among the greenest and most sustainable maritime facilities in the world. It is vital that ports, along with state and federal government, continue to partner and invest in California port infrastructure if the state is to maintain today s competitive position into the future. STATEWIDE, THE CALIFORNIA PORT SYSTEM IS CONSTANTLY REFINING AND IMPROVING EFFICIENCIES AND WE ANTICIPATE MAINTAINING A PRE-EMINENT ROLE IN U.S. GLOBAL TRADE. KRISTIN DECAS, CEO & PORT DIRECTOR AND CALIFORNIA ASSOCIATION OF PORT AUTHORITIES PRESIDENT

5 Currently, the California ports of Long Beach, Los Angeles and Oakland handle the vast majority of Trans-Pacific waterborne containerized trade with faster transit via water and rail to U.S. inland and eastern destinations. The West Coast share of total U.S. container import volume was 71%, and 76.5% of imports were higher value cargo from northeast Asia in Overall, U.S. demand for Asian goods appears steady. The world s largest vessels are also beginning to call at U.S. ports and these megaships exceed the maximum size for transit through the new Panama Canal locks and can serve to lower the costs of container shipping from Asian markets. Moreover, supply chain optimization efforts at the ports of Los Angeles and Long Beach will maximize efficiencies for cargo throughput at our nation s largest port complex. After the opening of the Panama Canal, these factors all converge to suggest the U.S. West Coast, and California in particular, will remain very competitive and vital links in Asia-U.S. Trade.

6 Relative Cargo Value a Factor in Water Versus Rail Higher value cargos generally seek to transport the product to market faster, even if the shipping mode may be more expensive. Products such as electronics, apparel and auto parts tend to seek the fastest shipping mode, often using rail from the West Coast to final destinations in the eastern and southern U.S. Lower value cargos, such as industrial materials, milled grain and foodstuff products, often seek the lowest cost shipping mode, even if it takes longer. 3 Shorter Transit Time to the West Coast from Asia Cargo transit time from Asia to the West Coast for shipment via rail to many southern and eastern U.S. destinations is faster than all-water Canal routes. On the other hand, all-water transit via the Panama Canal, is generally the least expensive shipping option, but increases shipping time. The map below shows the transit times from Asia to the West Coast, Gulf and East Coasts ports with rail connection timeframes. SHIPPING TO CHICAGO AND ATLANTA FROM CALIFORNIA IS A WEEK FASTER THAN TRANSITING VIA THE PANAMA CANAL AND RAIL FROM THE GULF OR EASTERN U.S. Source: Parsons Brinkerhoff: Panama Canal Expansion Study

7 Source: United States Maritime Administration: Waterborne Trade by Custom Ports Megaships Exceed Size of New Panama Canal Locks As of 2016, there are 144 global cargo vessels that exceed the size of the new Panama Canal locks and that number is projected to grow to 274 by the end of 2019, representing 17% of post-panamax vessels. 4 Some of these Super Post-Panamax ships are being deployed on the Trans-Pacific trade routes as shipping companies seek to maximize the efficiency of containerized cargo movements. The TEU volume carried by the largest vessels is projected to almost quadruple over the next four years, while the fleets of Post-Panamax size vessels 5,000 to 13,000 TEUs are expected to remain roughly even with TEU volume holding relatively steady. WE HAVE INHERENT STRENGTH IN THE CALIFORNIA MARITIME AND INTERMODAL INFRASTRUCTURE THAT ALLOWS US TO BE EXTREMELY COMPETITIVE FOR STRONG IMPORT AND EXPORTS CARGO FLOWS. CHRIS LYTLE, EXECUTIVE DIRECTOR

8 Source: Alphaliner: Cellular Fleet Projections California Container Port Complex Ready for Megaships California ports have the infrastructure today to service the largest vessels in the world. The natural deep water allows for the 50+ foot depth necessary for these megaships. The California intermodal infrastructure is becoming more efficient with cargo leaving the ports of Long Beach and Los Angeles via the Alameda Corridor, a below-grade railway dedicated to the movement of intermodal cargo. At the Port of Oakland, the Port Efficiency Task Force is currently working to maximize efficient throughput of cargo within the port s existing infrastructure. As vessel capacity grows, so will the capacity of California port infrastructure to service all levels of global shipping needs. The largest ship ever to call upon a United States port is the CMA CGM Benjamin Franklin, which called upon the ports of Los Angeles and Oakland in December 2015 and the Port of Long Beach in January The Benjamin Franklin has a capacity of 18,000 TEUs and the company may deploy additional vessels of the same size in the future for the Asia-West Coast trade routes should volume strengthen. 5 Larger vessels reduce per-container shipping costs and allow the shipping industry to lower average costs and maximize efficiency. At this time, the San Pedro Port Complex has the capacity to turn the vessels when loaded to over 80% capacity and cranes are being raised to service the vessels at 100% capacity. While costs of more efficient shipping through the Canal could be as much as 30% per TEU, natural cost savings are occurring for Asia-West Coast trade as larger megaship vessels will be up to 25-30% more fuel efficient. 6

9 New California-South American and European Trade Opportunities? The opening of the new Panama Canal locks could result in new California trade opportunities from the east coast of South America, specifically Brazil and Argentina. With the added capacity of the new locks, the efficiencies of larger vessels can be achieved in both directions through the Canal and could make some shipping options to California and the West Coast more economical. Soybeans and soy by-products, petroleum products, leather goods, technology products, and recyclables could become less expensive to ship via water. The largest refrigerated vessels in use today, with a capacity of 9,600 TEUs, will be able to traverse the new Canal locks and could lead to new opportunities for meat, poultry and fresh fruits and vegetable imports through California ports. Those efficiencies may also make allwater routing of European exports more attractive. THE WIDER PANAMA CANAL LOCKS AND OUR SUPPLY CHAIN OPTIMIZATION PROGRAM OPENS THE DOOR FOR TRADE EXPANSION WITH THE EAST COAST OF SOUTH AMERICA. GENE SEROKA, EXECUTIVE DIRECTOR Chinese Economic Slowdown Moderates Global Trade Growth Another significant variable on Asia-U.S. trade is the current economic slowdown in China. According to Chinese government reports, GDP growth slowed to 6.9% in 2015, the lowest rate of growth in 25 years. 7 Some outside economists suggest the actual growth rate could be even lower. The Chinese pullback contributed to the growth in global TEU volumes to be the lowest in 25 years at 1.1% for , though the U.S. enjoyed a net gain in container volume of 4.7%. This cyclical economic trend accelerated in the first quarter as Chinese exports fell year-over-year in February 2016 by 25.4% 9. When volumes rebound, the major California container ports will be fully megaship ready.

10 Summary California ports serve the majority of waterborne trade from Asia to the U.S., supported by a strong and efficient throughput infrastructure. As larger vessels are placed into service, the California port complex is evolving to accommodate these megaships. California ports are facilitating the shift to larger vessels in Trans-Pacific trade that further increases trade efficiency and lowers costs. This world-class infrastructure contributes to overall faster cargo throughput via water and rail to various eastern and southern U.S. markets. While more price sensitive and lower margin cargo could see increased routing through the widened Panama Canal, California ports will remain extremely competitive for containerized Asian imports. Recently, the growth rate of trade volumes from Asia has slowed, which could result in nearterm instability in Asia to U.S. trade routes. When economic cycles swing towards growth, shippers could increasingly evaluate new or modified routes. However, during this near-term period, California ports will also complete improvements to fully service the largest vessels calling upon the United States. All of these factors lead California ports to remain confident that their critical role in Asia to U.S. trade will continue into the foreseeable future.

11 Notes 1 Panama Canal Authority; 2 Panama Canal Expansion Study, Phase I Report: Developments in Trade and National and Global Economies, November 2013, MARAD, page Panama Canal Expansion Study, Phase I Report: Developments in Trade and National and Global Economies, November 2013, MARAD, page Alphaliner, Cellular Fleet Forcast, January CMA CGM to Deploy six more 18,000-teu Ships from Asia to West Coast; Mark Szakonyi, Journal of Commerce, March 3, 2016/CMA CGM Delays Regular Mega-ship deployments to West Coast; Bill Mongelluzzo, Journal of Commerce, April 20, Panama Canal Expansion Study, November 2013, MARAD, p China s Economic Growth in 2015 is Slowest in 25 Years; Mark Magnier, The Wall Street Journal, January 19, Global Container Port Growth Slowed to a Crawl in 2015, Brian Bernard, Journal of Commerce, February 24, Decline in China Exports Accelerates in February; Greg Knowler, Journal of Commerce, March 8, Page 5 Map: Parsons Brinckerhoff, Panama Canal Expansion Study, June 2012 / MARAD, Panama Canal Expansion Study, November Page 6 Map: MARAD; US Waterborne Container Trade by U.S. Custom Ports, based on data provided by the Port Import/Export Reporting Service as of August, Page 7 Table: Alphaliner

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