Executive Management Conference for Latin America and the Caribbean February February 12, 12, 2007 2007

Miami, Miami, Florida Florida

"Tools "Tools to to Lead Lead and and Manage Manage Competitive Competitive Ports" Ports"

Global Maritime Logistics & Port Operating Trends Macroeconomic Macroeconomic Situation Situation John Vickerman Norfolk, Virginia

Copyright Copyright © © 2007 2007

"Tools "Tools to to Lead Lead and and Manage Manage Competitive Competitive Ports" Ports"

Port & Intermodal External Industry Pressures Copyright Copyright © © 2007 2007

Global Trade: Current Course & Direction? Cargo Cargo Demands, Demands, Capacity, Capacity, Funding, Funding, Port Port Productivity Productivity & & Environmental Environmental Challenges Challenges

North American Port Gateways

Copyright Copyright © © 2007 2007

What We Know Today... Will Be Surely Be Different Tomorrow! Copyright Copyright © © 2007 2007

To Be Competitive Today... Marine/Intermodal Terminals Must Reduce Throughput Cost & Increase Cargo Velocity Securely and as Stewards of the Environment Copyright Copyright © © 2007 2007

Functional Classification of Global Maritime Cargoes All Maritime Cargo General Cargo

Break Bulk

Neo-Bulk

Sacks, Cartons, Crates, Drums, Pallets, Bags

Lumber, Paper, Steel, Autos

Bulk Cargo

Containerized

Liquid Bulk

Dry Bulk

Containers, Lift On/Lift Off (Lo/Lo), Roll On/Roll Off (Ro/Ro)

LNG, Petroleum, Molasses, Chemicals, Vegetable Oil

Grain, Sand & Gravel, Scrap Metal, Coal/Coke, Clinker, Fertilizer

Copyright Copyright © © 2007 2007

The “Port” One of the Many Diverse Constituencies in the Cargo Transportation Logistics Chain Port Railroads

Shipping Agents

Motor Carriers/ Truckers Freight Forwarders/ Brokers

Shippers Objective: A multimodal “Seamless” integrated world wide cargo conveyance system.

Customs Agencies Warehousing/ CFS Operators Pilotage/Tuggage

Carriers/ NVOCCs Stevedores/ Terminal Operators Longshore Labor

Governmental Regulation/ Compliance Copyright Copyright © © 2007 2007

The Global Container Industry Continues to Consolidate… Total Total number number of of slots slots Slots Slots controlled controlled by by top top 20 20 carriers carriers

Thousands of TEU Slots in Operation and on Order

Slots Slots controlled controlled by by 44 global global alliances alliances

10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

9,763

8,180 6,881 5,053

2,244

44.4% 1,479 1995

4,850

70.5%

4,027

2,674

59.3%

2000

2005 Copyright Copyright © © 2007 2007

The North American Freight Paradox: The Nation’s Ports and Their Intermodal Linkages are Experiencing the “Best of Times and the Worst of Times” in Terms of Growth and Demands on Capacity

Copyright Copyright © © 2007 2007

At Current Productivity and Growth Levels by 2020 North American Ports & Their Associated Intermodal Systems Will Be Severely Congested. In Today’s Supply Chain Congestion Can’t be an Excuse…

Copyright Copyright © © 2007 2007

We do not have an “intermodal system” as such. Rather we have an aggregation of multiple, private and public modes, each of which are “stove-piped” within their own individual areas of interest with little or no true cross communication and collaboration.

Copyright Copyright © © 2007 2007

Poll of the Top 1000 “Blue Chip” Multinational Shipper Priorities 43% Schedule Reliability & Consistency

38% Competitive Freight Rate

12% Transit Time & Speed

Copyright Copyright © © 2007 2007

Today’s Logistics Truth:

“The customer wants more and is willing to pay less for it.” Copyright Copyright © © 2007 2007

"Tools "Tools to to Lead Lead and and Manage Manage Competitive Competitive Ports" Ports"

International Maritime Cargo Demand Trends Copyright Copyright © © 2007 2007

World Bank’s 2010 “Global Economic Prospects” World Output will Increase 33% in 10 years

Trillions $

40

$ 40 Trillion

30 20

$ 30 Trillion

10 0 2000

2010 Copyright Copyright © © 2007 2007

World Container Forecast to 2024 in TEUs (186% Increase in Next 20 Years) Forecast

Growth Rate (CAGR) 1994 to 2004: 8.3 %

243 M

85 M

Growth Rate (CAGR) 2004 to 2014: 6.1 % 2014 to 2024: 5.0%

Source: Global Insight, 2004 Copyright Copyright © © 2007 2007

20.4 20.4

20

2003 World Container Gateways “The World’s Top 10 Port Gateways” 18.41

Hong Kong Alone is Equal to the Top 15 North American Container Ports

18 15 12

11.28

POLA + POLB 10.65

10.36

US Ports

8.84

9

Hamburg

Antwerp

3

Rotterdam

2

Kaohsiung

1

Pusan

0 Rank

5.45

Shanzhen

3

6.17

Shanghai

6

S inga p ore

7.11

Hong Kong

TEUs in Millions

13.1 (2004)

4

5

6

7

8

9

10

Source: Port Engineering Management, Vol. 22- Issue 6 - December 2004 Copyright Copyright © © 2007 2007

Global Market Economic Shifts (Country GDP Rank) 2000 #1 USA Japan

2010

2020

2030

2040

2050

USA

USA

USA

USA

CHINA #1

Japan

CHINA

CHINA

CHINA

USA #2

Japan

Japan

INDIA

INDIA #3

Germany Germany UK

UK

Germany

INDIA

Japan

Japan

France

CHINA

UK

Russia

Russia

Brazil #5

Italy

France

INDIA

UK

Brazil

Russia

#7 CHINA

Italy

France

Germany

UK

UK

#8 Brazil

INDIA

Russia

France

#9 INDIA

Russia

Italy

Brazil

France

France

Russia

Brazil

Brazil

Italy

Italy

Italy

Germany Germany

Source: Global Insight, 2005 Copyright Copyright © © 2007 2007

"Tools "Tools to to Lead Lead and and Manage Manage Competitive Competitive Ports" Ports"

The Growing Asian Import Trade Challenge Copyright Copyright © © 2007 2007

Global Interdependent Economics Have Resulted in a Major Product Sourcing Shift to Asia

Source: Source: Clarkson Clarkson Research Research Studies Studies Copyright Copyright © © 2007 2007

Today, more than 60% of all North American container trade is with Asia. European container flows have held steady (19% market share). 2005 North American Trade Regions 1% 3%

Total: 24.1 Million Units

6%

China

3%

North Asia

6%

North Europe

41%

7%

Caribbean/Central America Southeast Asia Mediterranean Indian Subcontinent

8%

East Coast South America Oceania Other

13% 12% Source: PIERS; Port Reported Throughput; Norbridge Analysis Copyright Copyright © © 2007 2007

Last 5 Years Asia- US Container Trade Increased 12% CAGR and China Accounted for 95% of the Increase

Source: PIERS, Port Reported Throughput, Norbridge Copyright Copyright © © 2007 2007

China-US: Twin Engines of the World

Population: US: 298 million China: 1,307 million (1/5 World)

The number of Chinese children in elementary school is equivalent to the total US population. Copyright Copyright © © 2007 2007

Mainland China Container Port Growth (Compound Annual Growth Rates) 25.9 % 27.3 % 35.4 % 17.1 % 30.1 %

5 Yr Average = 27.2% Increased Volume

Copyright Copyright © © 2007 2007

China’s Ministry of Railways Signed a 5 year Cooperation Agreement with the US BNSF Railroad for Intermodal Rail Development • • • •

Develop China’s high volume efficient intermodal network $242 billion program to 2020 On-dock & near-dock intermodal transfer yards at ports Ministry to build 18 mega-terminals with 7 at seaports, 40 smaller Intermodal terminals

Copyright Copyright © © 2007 2007

Shanghai International Shipping Center Yangshan Deep Port & Logistics Park New Port City

New Logistics Park

20 Mile New Port Access Bridge Constructed in 3 yrs

54 New Berths

Copyright Copyright © © 2007 2007

To 2015 China & India Are Projected To Continue To Drive North American Container Trade

9% Annual Growth 7% Annual Growth

Source: Global Insight, Norbridge Copyright Copyright © © 2007 2007

Emerging New Mexican Intermodal Gateways & Corridors – Nearly 4 Million TEUs Guaymus Guaymus 1.0 1.0 mil mil TEU TEU Punta Punta Colonet Colonet 11 mil mil TEU TEU Throughput Throughput

Lazaro Lazaro Cardenas Cardenas Phase Phase II -- 700K 700K TEU TEU Fut. Fut. Phase Phase -- 2.0 2.0 mil mil TEU TEU

Copyright Copyright © © 2007 2007

Marine Terminals Corporation (MTC) with partners Evergreen, Yang Ming, Hanjin, and China Shipping Announce Plan for a 1 Million TEU, $1Billion Greenfield Port Development at Punta Colonet Harbor, Baja Peninsula

Source: MTC Media Announcement April 2006 Copyright Copyright © © 2007 2007

New North American Container Gateway

Copyright Copyright © © 2007 2007

Connecting Canada’s Pacific & Eastern Intermodal Gateway Strategies Pacific Pacific Gateway Gateway

Potential Northeast Gateway

“North America’s North East Gateway” Copyright Copyright © © 2007 2007

The Emerging CN Transcontinental Land Bridge Pacific Pacific Gateway Gateway Northeast Northeast Gateway Gateway

Prince Rupert Transit Times

Copyright Copyright © © 2007 2007

Southeast Asian Manufacturing Centroid Shift Current Inbound U.S. Cargo Flow U.S. Intermodal Rail Flow Western Centroid Shift

Eastbound: All Water Flow Flow Eastbound: US Intermodal Rail Flow

Copyright Copyright © © 2007 2007

Southeast Asian Manufacturing Centroid Shift Current Inbound U.S. Cargo Flow Western Western Centroid Centroid Shift Shift U.S. U.S. Intermodal Intermodal Rail Rail Flow Flow

Westbound Westbound All All Water/Suez Water/Suez Flow Flow Westbound Westbound Intermodal Intermodal U.S. U.S. Flow Flow

Copyright Copyright © © 2007 2007

"Tools "Tools to to Lead Lead and and Manage Manage Competitive Competitive Ports" Ports"

North American Port & Intermodal Capacity Trends Copyright Copyright © © 2007 2007

Can North American Marine Terminals Handle the Forecasted Freight Volumes ?... Copyright Copyright © © 2007 2007

2010 Projected Public Port Capacity Shortfall Capacity Shortfall

75% of the 16 Ports Studied will have Significant Capacity Problems by 2010 Copyright Copyright © © 2007 2007

U.S. Containerized Tonnage Forecast Total 100

1,000 ,00 ,000 0 To n s

80 60

79.2

119.5

188.7

236.6

355.6

CAGR 7.8% 6.3%

NE (Maine to Virginia) SE (NC to Tampa) Gulf (Mobile to El Paso) SW (San Diego to Oakland NW (Oregon to Alaska)

6.6% 7.6%

By 2020 Most US Container Port Gateways 7.2% Will Double or Triple in Volume 40 20 0 1990

1995

2000

2005

2010

Source: DRI/McGraw Hill Copyright Copyright © © 2007 2007

North American Maritime Container Current and Future Trade Growth (Top 10 Ports)

6,848 1,665

15,835

59,420

Vancouver

4,478

1,776 2,557

NY/NJ By 2020 demand will exceed current capacity 4,396 of many U.S. ports by as much as 200%.1,809 5,566 1,798 Seattle

Tacoma 2,043

Virginia

3,382

6,639 1,860

Oakland

Charleston

13,101

9,420 6,165

(TEUs in thousands)

2004 2020

LA/LB

1,437

1,662 Savannah

Houston

Forecast figures based on 6 year linear regression

Copyright Copyright © © 2007 2007

Future US Truck Traffic Growth In Urban Consumption Zones Today

2020

Source: Source: USDOT USDOT FHWA FHWA Freight Freight Analysis Analysis Framework Framework Copyright Copyright © © 2007 2007

POLA/POLB Challenge: Truck Congestion Goods movement is a major contributor to traffic congestion and a bottleneck to future growth. I-710 Typical Day

I-710 During 2002 Port Lockout

Copyright Copyright © © 2007 2007

Capacity vs. Demand Bottom Line: Balancing Capacity and Demand is Both a Public and Private Issue ½

½

E

F

Capacity

E

F

Demand

North America’s future economic and environmental health is at risk as a result of declining transportation efficiency and reliability. Copyright Copyright © © 2007 2007

"Tools "Tools to to Lead Lead and and Manage Manage Competitive Competitive Ports" Ports"

Latin America North/South Freight Corridors Copyright Copyright © © 2007 2007

Emergence of the Demand for a North-South Freight Corridor Free Trade Zone Americas Trans-Atlantic Trans-Atlantic (EU-NAFTA) Trans-Pacific Route

Free Trade Zone Americas Copyright Copyright © © 2007 2007

Latin American Gross Domestic Product Growth, Last Two Decades 7

6.0%

P e rc e n ta g e

6 5 4

3.0%

3 2

1.7%

1 0

1980 - 1991

Early 1990’s

Late 1990’s Copyright Copyright © © 2007 2007

Major Increase of Trade Expected Between U.S. and Latin Americas Global Investment Shifts to Latin America • Chemicals • Textiles • Wood Products • Electronics • Vehicles

18 16 14 12 10 8 6 4

1.5 Million TEUs

20 35

20 25

20 16

20 10

20 00

19 98

19 96

19 94

19 92

2 0

19 90

TEUs (in millions)

Forecasted: 16 Million TEUs @ 6% CAGR

Expected 6 Million TEUs @ 3.5% CAGR

Copyright Copyright © © 2007 2007

Canada Canada Canada Canada

“Free Trade Area of the Americas” (FTAA) United United States United States UnitedStates States

Bahamas Bahamas Bahamas Bahamas Cuba Cuba Cuba Cuba

Largest Free Trade Zone In the World (Over $14 Trillion in 2006) A Tripling of US Exports with the Majority Bringing Manufactured Products to Central & South America… Mexico Mexico Mexico Mexico

Dominican Jamaica Dominican Republic Dominican Republic Jamaica Jamaica DominicanRepublic Republic Jamaica Belize Belize Belize Belize Haiti Haiti Haiti Haiti Lesser Lesser Lesser Honduras Lesser Honduras Honduras Honduras Antilles Antilles Antilles Antilles Nicaragua Nicaragua Nicaragua Nicaragua

Guatemala Guatemala Guatemala Guatemala El El Salvador El Salvador ElSalvador Salvador Costa Costa Rica Costa Rica CostaRica Rica

Panama Panama Panama Panama

Venezuela Guyana Guyana Venezuela Venezuela Guyana Venezuela Guyana Suriname Suriname Suriname Suriname French French Guiana French Guiana Colombia FrenchGuiana Guiana Colombia Colombia Colombia

Ecuador Ecuador Ecuador Ecuador

Brazil Brazil Brazil Brazil

Peru Peru Peru Peru

Bolivia Bolivia Bolivia Bolivia

Central Central American American Common Common Market Market

Andean Andean Community Community & & Mercosur Mercosur Associate Associate

ile ile iile le

h C Ch Ch Ch

Andean Andean Community Community

Paraguay Paraguay Paraguay Paraguay

Argentina Argentina Argentina Argentina

Uruguay Uruguay Uruguay Uruguay

Mercosur Mercosur Mercosur Mercosur Associates Associates NAFTA NAFTA Caricom Caricom (15 (15 countries) countries)

Falkland Falkland Falkland I. I. (UK.) (UK.) FalklandI. I.(UK.) (UK.)

Tierra Tierra Tierra Tierra del del del Fuego Fuego delFuego Fuego

Copyright Copyright © © 2007 2007

North America’s North-South Multi-Modal Super Transport Corridor Coalition (NASCO) An An Inland Inland Port Port Network Network along along NAFTA NAFTA Corridor Corridor Routes. Routes. Specifically Specifically Planned Planned to to Alleviate Alleviate Congestion Congestion at at Ports, Ports, Urban Urban Intermodal Intermodal Centers Centers and and at at Border Border Crossings. Crossings. Copyright Copyright © © 2007 2007

Trans-Texas Trans-Texas Multi-Modal Multi-Modal High High Priority Priority Freight Freight Corridor Corridor TTC-35 TTC-35 Copyright Copyright © © 2007 2007

Kansas City’s SmartPort Investor Investor Based, Based, NonNonProfit Profit Economic Economic Development Development Organization Organization Supported Supported by by both both the the Public Public and and Private Private Sectors. Sectors. A A Regional Regional International International Trade Trade Processing Processing Center, Center, Permitting Permitting Freight Freight to to Clear Clear US US Customs Customs in in Kansas Kansas City City and and Avoid Avoid Border Border Delays. Delays. Copyright Copyright © © 2007 2007

Canadian Canadian Intelligent Intelligent Super Super Corridor Corridor (CISCOR) (CISCOR)

Copyright Copyright © © 2007 2007

"Tools "Tools to to Lead Lead and and Manage Manage Competitive Competitive Ports" Ports"

Maritime Vessel Technology Trends Copyright Copyright © © 2007 2007

April 26, 1956

58 Modified 35-foot Truck Containers

In 1955 Malcolm McLean, sold McLean Trucking, and secured a bank loan of US$42 million to build the world's first container ship. Copyright Copyright © © 2007 2007

World Container Ship Evolution TEU Capacity

1,700 TEU

Ideal Ideal X X

1st Generation

(Pre-1960 - 1970) 2,305 TEU

2nd Generation (1970 - 1980) Panamax Panamax

3rd Generation

(1985)

Post Post Panamax Panamax

4th Generation

4,848 TEU

(1986 - 2000) Super Super Post Post Panamax Panamax

5th 5th Generation Generation

3,220 TEU

8,600 8,600 TEU TEU

(2000 (2000 -- 2005) 2005) Copyright Copyright © © 2007 2007

Madison Maersk (3,928 TEUs) in the Panama Canal (Current Max Panamax = 5000 TEUs)

Copyright Copyright © © 2007 2007

Today’s Mega Ships - Measuring Up

Eiffel Tower – 990 feet

Regina Maersk – 1043 Ft, 140 Ft wide, 6000+ TEUs Copyright Copyright © © 2007 2007

Today’s Mega Ships - Measuring Up How Wide, How Deep? Pre-1970

1970-1980

1985

1986-2000

2000-2005

2,305 TEU

3,220 TEU

4,848 TEU

8,600+ TEU

10-11 Containers Wide

11-13 Containers Wide

13-17 Containers Wide

17-24 Containers Wide

1,700 TEU