rob shepard international forest products trans-pacific exporter issues: an exporter’s perspective...

Rob Shepard

International Forest Products

Trans-Pacific Exporter Issues: An Exporter’s Perspective

Trans-Pacific Exporter IssuesAn Exporter’s Perspective

Rob Shepard

Director of Transportation & Logistics

The Kraft Group/International Forest Products

Rob Shepard



March 1, 2010

The Kraft GroupEntertainment Businesses

Forest Products Businesses

Rob Shepard



March 1, 2010

OUTLINE

1. Why Exporters are the way they are

2. The Dilemma Carriers Face on Exports

3. Carriers’ Impact on Forest Products

4. Current Issues facing Exporters

5. What will happen after Chinese New Year

Rob Shepard



March 1, 2010

EXPORTERS ARE TRADERS

Source: JOC


Importer Sector TEU'SWal Mart RETAIL 720,000Target RETAIL 445,800Home Depot RETAIL 300,400Sears RETAIL 229,400Dole FOOD 216,900Costco RETAIL 195,400Lowes RETAIL 182,100LG CONGLOMERATE 170,600Phillips ELECTRONICS 127,200Chiquita FOOD 113,650Heineken FOOD 108,200Ikea RETAIL 100,300Ashley furniture RETAIL 96,700GE CONGLOMERATE 89,200Jarden APPLIANCES 80,500Samsung ELECTRONICS 51,100Redbull FOOD 50,000Nike RETAIL 50,300JC Penny RETAIL 63,400Whirlpool APPLIANCES 49,600

TOP 20 IMPORTERSExporter Sector TEU'SAmerica Chung Nam FOREST PRODUCTS 220,700Weyerhaeuser Co. FOREST PRODUCTS 147,100Cargill Inc. FOOD 127,800Koch/GP/Harmon FOREST PRODUCTS 111,800International Paper FOREST PRODUCTS 107,400Dow Chemical CHEMICALS 106,600Du Pont CHEMICALS 98,900Potential Industries FOREST PRODUCTS 87,700P&G CONSUMER GOODS 80,600MeadWestvaco FOREST PRODUCTS 75,500Allan Co. FOREST PRODUCTS 72,300Archer Daniels AGRICULTURE 63,800BASF CHEMICALS 63,000Delong ANIMAL FEED 61,800Exxon Mobile CHEMICALS 60,200J.C Horizon FOREST PRODUCTS 60,000Denison FOREST PRODUCTS 58,400CGB Enterprises AGRICULTURE 57,800Sims METALS 57,600Canusa Hershman FOREST PRODUCTS 57,300

TOP 20 EXPORTERS

AND FOREST PRODUCTS IS THE TOP EXPORT

IMPORTERS ARE BRANDS

Rob Shepard



March 1, 2010

• US Exporters compete against Global Markets• Majority of TEU Export tonnnage is low value

– Look for every advantage – Need efficiency & economy of movement

• Freight critical to trades– Most Efficient Routing Options– Find Best ways for Container Utilization

• Sourcing decisions can be based on Freight


Rob Shepard



March 1, 2010


Breakdown of Costs for FCL Shipment

0%

20%

40%

60%

80%

100%

Apparel Footwear KLB Wastepaper

FreightDutiesCOGS

Freight Accounts for 30% of Landed Cost for Forest Products

And Exports have much Lower Margin that can’t tolerate additional Costs

Rob Shepard



Page 8March 1, 2010

J-9

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Eastbound Westbound

• Export rates started deteriorating 13 years ago

• Imbalance of Trade kept rates depressed

• Change in cargo type also contributes to this

• Export rates near 10 year high

Historical Rate Levels on Transpacific Container Trade

Souce: Containerization International

2. The Dilemma Carriers Face

Rob Shepard



Page 9March 1, 2010

Drop in Imports has led to more balanced Tradelane

• Less Backhaul pricing for commodities that have depended on it

• Exporters assumed immediate service & unlimited capacity

• Little margin to store cargo for any time

1.9

1.41.5

1.72.0

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2

4

6

8

10

12

14

16

18

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2005 2006 2007 2008 2009

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Imports Exports Ratio


Source: JOC

Rob Shepard



Page 10March 1, 2010

• If Carriers raise rates to compensatory levels, export volumes of base cargoes will drop sharply

• If Carriers keep rates at low levels to promote trades, they only hurt themselves

• In tight export markets, if Carriers abandon the larger volume base cargoes, they jeopardize damaging long term relationships and impacting sourcing decisions


Rob Shepard




• Largest volume commodity – 25% of Exports

• Steady Base Cargo

• Matches up with Carrier Asset management model– Waste paper prevalent around dense population areas– Pulp/Paper routing to Port Stuffing Sheds: Port – Port

• Good for forecasting – correlated to GDP growth

• Sustainability

Why Carriers should stay committed to Forest Products 3. Carriers’ Impact on Forest Products

Rob Shepard




% of Wastepaper Volume to China by US Coast

25%

35%

45%

55%

65%

75%

A-09 M-09 J-09 J-09 A-09 S-09 O-09 N-09 D-09

West Coast East Coast

• In Nov. Carriers imposed a two tier BAF formula making West Coast BAF $42/40’ less than East Coast BAF

• USWC WP gained $1.75/MT advantage

• Immediately impacted Flows

• Shows China will buy Fiber from lowest cost source and rate sensitivity of WP trade

WTSA BAF Policy on WP: USWC = $44/40’; USEC = $86/40’

Souce: USITC

Note uptick in West Coast Volume in Nov after BAF Split

3. Carriers’ Impact on Forest Products

Rob Shepard




Exporter Issues• Rate: Rate Request turnaround, Rate Validities• Space: Allocation guarantees, Service Changes• Does Automation in Booking Process work?• Equipment, Booking Execution, Doc Turnaround• Shortened Delivery Windows with tighter cutoffs• Port Congestion & Supply Chain Capacity constraints• Free Time/Avoiding unnecessary charges

4. Current Issues Facing Exporters

Rob Shepard




Keeping up with the GRIs40' Rate USEC - CNBP

$150

$86$86

$86$150

$150

$100

Q2

Rat

e

Oct

GR

I

Oct

BA

F

Nov

BA

F

DE

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Jan

GR

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Feb

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Mar

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Cur

rent

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• Carriers cannot offer quotes to extend to Q2

• GRI announcements made with little notice to sell increase

• Announcements difficult to keep up with

• Rate Levels are deterring trades


Rob Shepard




The Reality of a Tight Market

• Lack of Equipment at most ports– Smaller ports getting squeezed

– Reduction of Inland CY Locations

• Less allocation due to reduced vessel capacity– Need to book farther in advance

– Booking confirmation <> Space & Equipment guarantee

– Requires tighter execution of supply chain partners

• Shorter times for booking execution– Increased chance of rolled bookings/per diem fees


Rob Shepard




What will happen after Chinese New Year?• Asia sitting on large raw material inventories• Weather, other factors impacting supply• Waste Paper Generation down due to no imports• High FOB Costs for Material & High Freights• All Commodities facing tight supply; less export• Tightening credit in CN due to economic fears

Will China buy at same rate after CNY as before Will deployment of Peak Season Capacity create

relief for current Exporters’ woes

Rob Shepard



Trans-Pacific Exporter IssuesAn Exporter’s Perspective

Rob Shepard

Director of Transportation & Logistics

The Kraft Group/IFP Corp.

March 1, 2010

Long Beach, CA

rob shepard international forest products trans-pacific exporter issues: an exporter’s perspective...

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