Introduction Assessing The Best Approach For Exporting And Shipping Derivatives And Manufactured Products - What Is The Most Economic Option? Revealing the comparative logistical economics with regard to shipping between polyethylene and other derivative forms What is the business case for advanced manufacturing to finished products, such as high performance films, to keep production advantage in North America? Your Target Export Market Logistical Specialization Product Specialization
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NAM: The Chemical Output wave Ethane Supply USA COMPOSITION OF NEW CAPITAL INVESTMENT BY CHEMICAL INDUSTRY SEGMENT CHEMICAL INDUSTRY CAPITAL INVESTMENT BY REGION 2012 2013 2014 2015 2016 2017 2018 2019 2020 Baseline ($) 587.2 603.2 614.8 631.5 655.9 680.1 700.1 720.8 743.0 New Investment ($) % deviation from base 589.4 606.5 620.6 645.8 683.8 721.8 750.7 773.2 809.8 0.4% 0.5% 0.9% 2.3% 4.3% 6.1% 7.2% 7.3% 9.0% 265
Targeting Export Markets: Production cost vs. Total Landed Cost Global Ethylene production per 01/01/2013 (TPY) LAM 5% WEU 17% APA 30% Estimated Average Supply Chain spent distribution NAM 24% MEA 18% EEU 6%
A variety of Logistical Challenges Logistical Agility and Linkage as the key variables in determining and defining our Export competitiveness: -> ultimate goal: find balance in between costs & service levels & flexibility & sustainability Strategically challenges: Reversal in Strategery : Switching a nation s mindset from Overweight Import to an Export focus in a relative short timeframe One sector moving forward too fast? Develop horizontal and vertical integration along the Supply Chain to ensure optimal asset deployment A longer Supply Chain causes increasing complexity: higher logistics costs & pressure on the general transport capacity Shifting powers between Shippers and LSP s due to increasing interdependence Regulatory impact: Emissions, safety & security create sustainable logistics strategies Infrastructural funding gap: Capex or capsize? Increasing importance of Technology & IT: visibility & cost control
A variety of Logistical Challenges Infrastructural challenges: Connectivity constraints to foreign markets: Port infrastructure & Oceanic linkage connecting the US market to the world Post Panamex Inland infrastructure: Rail network connectivity and Road transportation: More competition needed and is congestion becoming the new norm? Intermodalism & overheated port competition: weakening the system from within Export Enablers & availability: the capacity challenge: constraints on people, equipment and providers new and abundant production of various goods competing to secure scarcer means of export Changing dynamics of the Global Supply Chains: Near Shoring and geographic production shift: lesser imports vs increased domestic export competition Packaging/handling/warehousing: requirements, restrictions & regulations :at plant versus export port v-a-v End Market product requirements on packaging configurations
Equipment imbalance Gulf Region Trade Imbalance TEU 457,100 661,000 703,000 694,600 731,900 706,600 583,200 609,300 560,900 661,000 811,900 284,900 574,500 Empty containers Surplus 25.34% 34.23% 35.43% 36.29% 37.83% 36.71% 32.70% 32.98% 32.40% 34.61% 40.97% 18.84% 30.23% Import/Export imbalance in TEU: March 2012/2013
Considerations Cross vertical collaboration with inbound cargo owners: Develop & maintain reverse flow corridors across sectors and regions Benefits from collaboration & matchmaking process Market distortions/differences & Politics International Trade: Cultural & infrastructural differences Global GDP Geopolitics: US & International: Financial uncertainty and political instability Environmental issues & permitting as determining factors: Environmental inactivity Market distortions: Increased output and international competition disrupting local economies and finally resulting in imposing of trade barriers by local governments The influence and impact of labor Unions Future changes in production & feedstock cost positions Shale gas exploration to develop elsewhere & possible impact on supply and price? Ethane/Ethylene exports as feedstock and feedstock reconversion of old/foreign crackers? Change to Ethane as primary feedstock has dramatic impact on co-product supply > more on-purpose production investments expected! Any other sectors being revolutionized by the Shale bonanza? Impact on export logistics?
Conclusions Chemical Output increase still to occur Domestic US market unable to absorb the production increase Severe infrastructural bottlenecks limiting of US export market capabilities Ability of logistics cost differential to support US competitiveness How to about any foreign market import resilience? Changing historical global trade balances: Planning ahead is required The most economic export option: How to sustainably capture the current production cost benefit throughout the supply chain cycle? -> Product abundance vs. scarce feasible export routes and modes: perverse effects on product price & transportation cost ->Increase your value chain connectivity: Supply Chain flexibility & Agility through partnerships on various levels ->Improving the logistical linkage: infrastructural improvements & increasing efficiency leading to competitive export
Thank You Kristof Peerlinck Head of Business Development Chemicals North America Mail: kristof.peerlinck@damco.com Phone: (+1) 281 794 9812