ports under pressure

British Maritime Technology 1

British Maritime Technology

Leader in Port & Logistics Business Intelligence & Advisory

Services

Richard Szuflak – Director of European Operations, BMT Maritime Consultants

Russell Smith – Managing Director, BMT Maritime Consultants


Ports Under Pressure

What is driving port congestion?

The key pressure points.

Where to from here?

BMT’s contribution to helping solve the

problem.


What is driving port congestion?

Increased demand for product coupled with available

supply means that the logistics chain is a key limiting factor

in driving the market.

Ports are a key element in this logistic chain, as are

landward connections and shipping routes.

However land based infrastructure has a longer lead time

than shipping and thus is looming as the key bottleneck in

allowing product supply to meet demand.

This is particularly critical at certain pressure points

worldwide including China, Europe, US west coast,

Australia and South Africa.


Seaborne Trade Growing Faster than World

Economy: Example of Container Trade

0

20

40

60

80

100

120

140

1980 1990 1995 2000 2002 2004 2006 2008 2010

MT

EU

sh

ipp

ed

Average growth per Annum of World Economy 2004 to 2010: +2%

Average growth per Annum of Container Trade 2004 to 2010: +8%


The Markets - Containers

Container market booming with strong underlying

fundamentals.

The containerisation of goods still has a long way to travel,

indicating that container growth should continue to be well

above world trade growth for some time yet.

Containerisation one of the drivers behind the migration of

manufacturing to the Far East.


The Markets – Dry Bulk Products

Bulk demand increasing steadily,

especially for coal and iron ore, as

well as agri-bulk commodities.

This creates congestion at world

export ports – particularly in

Australia, Brazil, South-Africa and

India.

China’s port and railway

infrastructure cannot cope with the

country’s needs for raw materials.


The Markets – Oil and Gas

Oil supply to decline after a peak between 2010 and 2020.

LNG is the key growth product worldwide.

LNG demand to rise 100% by 2010 on the back of strong

demand from Europe, USA and now China.

Supply will lag demand without significant investment in

sourcing new product and logistics infrastructure.

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120

140

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220

240

2003 2004F 2005F 2006F 2007F 2008F 2009F 2010F

millio

n t

on

nes

Forecast Demand

Identified Supply

Forecast LNG Supply-Demand Balance 2003-2010


Shipping Industry Quick to React

With the acceleration of global growth earlier this decade, the

shipping industry was quick to react.

New build orders soared and older vessel retirement was

delayed.

Freight prices boomed and are still extremely high.

With a two year lag time on new vessel builds, the demand

pressures in the shipping industry will soon ease and charter

rates will drop – particularly in 2006.

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20

40

60

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100

TankersBulk

ContainersLNG

% of New Orders to 2008 vs. Existing Fleet

676 new vessels 3.7 Million additional

vessel slots, approx 1,200

vessels80 new vessels

980 new vessels


Shipping Industry Quick to React

The market moving forward will be changed.

Container ship sizes will continue to increase whilst bulk

vessel sizes will be dominated by the cape and panamax

class of vessel until Chinese and Indian ports deepen.


Not so for Ports and Logistics…

With the pressure off shipping the spotlight will transfer

specifically to the port and landside logistics operations as

the main bottleneck.

Whilst recognising the problem at the same time as the

shipping industry, the port industry has much longer lead

times, particularly in developed countries where

government requirements for new projects are stricter.

Expansion of ports in the booming Far East is occurring

much faster than in the developed world → imbalance.

Therefore, whilst pursuing infrastructure and equipment

upgrades at key ports, equally important to the capacity

development of the overall logistics system are efficiency

improvements and alternative logistics route development.


… Despite Rapid Growth

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5

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15

20

25

Millions TEU

Hong-K

ong

Singapore

Shanghai

Shenze

n

LA/LB

R'dam

Selected Container Port Traffic

1999-2001-2003

In 1995, only 5 ports

were above the 3

Million TEU mark

More than 20 ports

nowadays pass this

mark

Of which 11 are in Asia

Extra Rapid Growth

registered in Shenzen,

Shangai, Tanjung

Pelapas and Quingdao

Also in Dubai


The Pressure Points

Europe

• Russian trade growth is causing problems on east-

west ports, road and rail networks

• Western European container port capacity is a

problem – congestion surcharge being applied at

Rotterdam and Antwerp

• Established French ports (Le Havre-Marseilles) not

able to cope with extra flow → deviation to secondary

container ports - Dunkirk, Antwerp, Genoa, Barcelona

United Kingdom

• Trade actually declining through the large UK ports

• Container port congestion in the south the main issue


The Pressure Points

Asia

• Chinese container ports

expanding at 50% yr on yr

• Shipping queues in

Australian bulk ports over

50 long

• Coal rail networks running

at 110% traditional

capacity and unable to

expand quickly

• Indian ports are a mess

and are constraining

economic development

http://www.pbase.com/procyon_g/jlandscape&page=4


The Pressure Points

Middle East

• Keeping up with demand through massive government expenditure centered around Dubai

• Need strong competitors

Africa

• Long ship queues off the coal ports of South Africa

• Port of Mombassa stagnating East African growth

• LNG port development urgently required in Nigeria


The Pressure Points

North America

• West coast container ports in crisis – 94 container vessels waiting off LA/Long Beach in October 2004

• Poor productivity and labour shortages are limiting capacity

• Mexican and South-American ports chosen by shippers to escape congestion

• Consideration to deliver to Eastern Ports via Panama Canal and then overland west

South America

• Bulk ports upgrading to meet demand but still under developed

• Exports more competitive due to currency devaluation thereby boosting trade


What does this mean?

Growing port throughput throughout the world:

Port industry under strain from sustained throughput demand growth of customers

CAPEX expansion and operational efficiency improvements too slow

Millions of pounds in lost revenue to port owners, transport providers, manufacturers, mines and the worldwide economy from bottlenecks


Need Flexibility to Meet the Market

CAPEX expansion takes time:

Typical period between firstly

identifying a physical capacity

limitation through to commissioning

of a completed facility is usually of

the order of 4 years

Whilst planning physical expansion,

ports are now understanding the

importance of improving operational

efficiency and logistics route choice

as a means to overall improvement

of throughput.


Three Key Requirements

Therefore three things must happen:

1. Firstly port companies must

improve business intelligence to

be able to accurately forecast

throughput demand and hence

plan to bring new facilities on line

as a when required by the market.

2. Secondly ports must focus on

improved operational efficiency.

3. Thirdly ports must focus on acting

as an efficient link in a much

longer logistics chain to capture

additional market share.


Port Business Intelligence - Examples

Currently 1.2 million TEU per annum which is either generated in

or being delivered to locations north of the M62 moves through

the southern UK ports and is trucked north Opportunity clearly

exists for north-eastern ports to capture a significant share of this

1.2 million TEU per annum through implementing short sea

logistics solutions with the European hub port operators.

Trans-Siberian volumes booming to avoid St-Petersburg

congestion.

Australia’s Dalrymple Bay Coal Terminal set to double its coal

export capacity to cope with demand increases by customers.

Development of container barging on the Rhine and Maas rivers

to avoid road traffic congestion in Belgium/Holland/Germany.

Shanghai expansion and mega-projects are planned on the back

of strong growth forecasts.


Port Business Intelligence - Examples

BMT Relevant Projects - 2004

Western Shenzhen Ports (China)

Capacity constraint analysis for the worlds

fastest growing container port region.

Dalrymple Bay Coal Terminal (Australia)

Full commercial planning for worlds 3rd

largest coal terminal.

Gdynia Container Terminal (Poland)

Full business planning and sales advice for

Poland’s second container terminal –

sold to HIT in October.

Singapore LNG Terminal (Singapore)

Feasibility analysis for new LNG terminal.


Improvement of Port Operations - Examples

Improved product tracking and assignment

Improved equipment usage

Improved labour productivity

Terminals open 7/24 for loading trucks and barges

Improvement of handling techniques and nautical access

EDI and E-Business Solutions


Hong-Kong Marine Congestion Improvement

and Traffic Modelling

PROMIS Integrated Port Management

System for Dubai Ports Authority


Logistics Chain Development - Examples

Increased port involvement in global logistics, shipping, trucking

and forwarding: PD Ports in UK, Northern Manuport in Belgium…

Feeder services developed by ports to capture traffic: Dunkirk

Ports involved in railway development: Antwerp, Rotterdam

Ports create “back-yard” terminals: Amsterdam/Duisburg


Goonyella coal logistics chain

improvement

Logistics Chain Modelling in North

Sea and Baltic

Major investment in Logistics Chain

modelling for South-East Asia


BMT Transportation Market Advisory Services

Recognising the growing requirements of the port and logistics

industry BMT is focusing on enhancing its transportation sector

capabilities to assist its customers in:

• Operational Improvements

• Reducing and Optimising Transport Costs

• Increasing Overall Efficiency

• Improving Financial Performance

• Business Planning for Optimal Returns


BMT Maritime Consultants

A member of the BMT Group of companies

Leader in Port & Logistics Business Intelligence & Advisory

Services

ports under pressure

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