Logistics Costs: Trends and Implications. Joseph Bryan Managing Director, Global Trade and Transportation Global Insight

Transcription

1 Logistics Costs: Trends and Implications Joseph Bryan Managing Director, Global Trade and Transportation Global Insight

2 Overview Points on trade U.S. freight projections Capacity strains Trends for surface carriage Copyright 2007 Global Insight, Inc. 2

3 Trade Growth Uneven Across World 10 8 (Percent change, real GDP) Emerging markets grow fastest NAFTA Other Americas Japan Western Europe Emerging Europe Other Asia India Mideast & Africa Source: Global Insight World Service Copyright 2007 Global Insight, Inc. 3

4 Market Shifts Coming (Country GDP Rank in Billions of Real (2003) U.S. Dollars) U.S. U.S. U.S. U.S. U.S. China Japan Japan China China China U.S. Germany Germany Japan Japan India India U.K. U.K. Germany India Japan Japan France China U.K. Russia Russia Brazil Italy France India U.K. Brazil Russia China Italy France Germany U.K. U.K. Brazil India Russia France Germany Germany India Russia Italy Brazil France France Russia Brazil Brazil Italy Italy Italy Source: Global Insight World Service and Goldman Sachs Copyright 2007 Global Insight, Inc. 4

5 U.S. Was Engine of World Growth In 2006 Became Asia Inflation remains under 4% in most of Asia (exceptions include Indonesia, India, and the Philippines) High saving rates mean Asian economies will continue to be capital exporters and potential investors in ports and transportation infrastructure China s economic boom will have a soft landing 1/3 of the world s container trade is now intra-asian U.S. trade grows faster than other developed countries, but slower than developing economies Copyright 2007 Global Insight, Inc. 5

6 U.S. is Becoming a Trading Nation 21% 18% U.S. imports and exports as percent of GDP 15% 12% 9% 6% 3% Imports Exports Copyright 2007 Global Insight, Inc. 6

7 U.S. Freight Growth: 5 and 10 Years U.S. Freight Growth to 2015 from 2005: % Year % ,000 10,000 15,000 20,000 Tons (Millions) Air Other Rail Truck Water Copyright 2007 Global Insight, Inc. 7

8 Long Range U.S. Freight Growth 10,000 9,000 8,000 7,000 By sector and mode Water Rail Truck Millions 6,000 5,000 4,000 3,000 2,000 1, High Value Manuf. Other Manuf. Agriculture Mining Misc. Pkg. Other Wholesale Dist. Copyright 2007 Global Insight, Inc. 8

9 Shift in Modal Shares Copyright 2007 Global Insight, Inc. 9

10 Long Range Sectoral Shift Copyright 2007 Global Insight, Inc. 10

11 Nation s Three Key Inland Distribution Hubs Copyright 2007 Global Insight, Inc. 11

12 Growth in U.S. Marine Trade (tons) Copyright 2007 Global Insight, Inc. 12

13 Container Imbalance Grows into Major Problem Millions 25 Transpacific trade will be problematic TEUs N. Eur-F.E. Med\B.S.-F.E. N. Am-F.E. ISC-F.E. N. Am- N.Eur Copyright 2007 Global Insight, Inc. 13

14 Port Terminal Capacity Constraint Million TEU Source: SSA Marine Copyright 2007 Global Insight, Inc. 14

15 New Containership Capacity from 2007 Deliveries Teu (000) Ships Greatest capacity additions: East West trades 147 Ships 62 Ships 42 Ships 65 Ships 76 Ships < Panamax Post Panamax >7800 <7800 Copyright 2007 Global Insight, Inc. 15

16 New Containership Capacity Copyright 2007 Global Insight, Inc. 16

17 Ports and Hinterland Port choice for large ships Europe Focus will be on 2 3 hub ports Hinterland connectivity Asia No shortage of ports or capacity North America Remains an issue due to lack of new technology Continuing port investment required Ports must invest in new technology and automation to avoid congestion caused by Ultra Large Containerships Copyright 2007 Global Insight, Inc. 17

18 Groundside: Inland Destinations for U.S. Marine Imports Copyright 2007 Global Insight, Inc. 18

19 Rail Freight Growth 2004 to 2035 Copyright 2007 Global Insight, Inc. 19

20 Estimated Rail Freight Bottlenecks Railroads are pricing capacity; train technology may help Copyright 2007 Global Insight, Inc. 20

21 Highway Freight Traffic 2004 Copyright 2007 Global Insight, Inc. 21

22 Major Truck Freight Bottlenecks 2004 Copyright 2007 Global Insight, Inc. 22

23 Congested Highways 2002 Copyright 2007 Global Insight, Inc. 23

24 Potential Congested Highways 2035 Copyright 2007 Global Insight, Inc. 24

25 Truck Volume Growth Eastern PA Copyright 2007 Global Insight, Inc. 25

26 Congestion Effect on Trucking Costs Fixed hours of service plus slowing road conditions = higher operating costs over time Truckload Operating Expenses Dry Van, ca Directly affects utilization Equipment costs, ROA 11% 10% 6% 4% 1% 24% 43% Labor Fuel Depreciation Maintenance Insurance Tax & License Communications Ultimately affects wages Process of attrition 11-hour day or 10? Terminals, too Copyright 2007 Global Insight, Inc. Copyright 2005 Global Insight, Inc. 26

27 Funding Inadequacy Dollars (in Billions) 50 Highway program levels and trust fund balances Highway Program Highway Balance Transit Program Transit Balance Copyright 2007 Global Insight, Inc. 27 Year

28 Growth in Tolling Like U.S. railroads, U.S. government is starting to allocate capacity with price Managed lanes New, tolled construction Public-private partnerships Copyright 2007 Global Insight, Inc. Copyright 2005 Global Insight, Inc. 28

29 Rising Fuel Costs US Diesel Retail Price Primary element of freight cost tripled in 7 years Price (cents per gallon) Year Copyright 2007 Global Insight, Inc. 29

30 Fuel Cost Projection U.S. Diesel Retail Price Projection Risks are upward, not downward 350 Price (cents per gallon) Year Copyright 2007 Global Insight, Inc. 30

31 The Wal-Mart Way Wal-Mart Fleet Goal: 25% Mpg by 2008 Driver training and behavior Auxiliary power units Speed Tires 2015 Goal: 100% Improvement in fuel cost of distribution Fuel additives Aerodynamics Copyright 2007 Global Insight, Inc. 31

32 Driver Supply Truck driver turnover improved in 2006 but still over 100% Demographic trends unfavorable Immigration and NAFTA changes unlikely to help much Upward pressure on wages Copyright 2007 Global Insight, Inc. 32

33 Regulatory Changes Expect TS&W liberalization in reauthorization bill 97,000 LB 3S3 Fight over bridges Expansion of hazmat restriction Truck and rail Copyright 2007 Global Insight, Inc. Copyright 2005 Global Insight, Inc. 33

34 Rail Costs Flatten RCAF Index (2003=100) Year Copyright 2007 Global Insight, Inc. 34 Copyright 2005 Global Insight, Inc.

35 Main Net Effect from Fuel But delivery costs could become a problem IMX Dray & Lift Costs 3/4 of Total at Shorter Distance 80% 70% 60% 50% 40% 30% 20% 10% 0% Dray & Lift % Total Cost by Mile Block Copyright 2007 Global Insight, Inc. 35 Copyright 2005 Global Insight, Inc.

36 Freight Carrier Organization Service chain is the carrier enterprise Not a modal conglomerate Depends on technology and people Copyright 2007 Global Insight, Inc. 36

37 Thank You Joe Bryan Managing Director, Global Trade and Transportation