Transcript International Trade and Logistics Implications for the

Trends in International
Trade and Logistics and
Implications for the
Future Role of Indiana
September 16, 2003
Indianapolis, IN
Martin Associates
2938 Columbia Ave., Suite 602
Lancaster, PA 17603
1
International Trade Has Been a
Growing Sector of the US Economy
$2,500
Billions
$2,000
$1,500
$1,000
$500
$0
1960
1970
1980
1985
Exports
Value of Trade in Goods
1990
1995
2000
2002
Imports
2
Trade in Goods is an Increasing
Share of US GDP
13.3%
15.5%
18.1%
20.2%
18.4%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
US GDP
Trade
1985
1990
1995
2000
2001
3
Exports from Indiana Have Shown Strong
Growth in the 1990’s -- 13th in Terms of
Growth in State Exports and Nearly 8% of GSP
$16
Billions of Dollars
$14
$12
$10
$8
$6
$4
$2
$0
1993
1994
1995
1996
1997
1998
1999
2000
4
Ships and Barges Transported the Majority of
the US Trade in Terms of Value
Pipeline
1%
Air
30%
Water
41%
Truck
23%
Rail
5%
5
2001 Bureau of Transportation
Statistics
Ships and Barges Transported More than
Three-Quarters of the US Trade in Terms of
Tonnage
Truck
11%
Air
0%
Rail
Pipeline
5%
6%
Water
78%
6
2001 Bureau of Transportation
Statistics
The Marine Transportation System is
Critical to the Country’s Economic
Growth

Deepwater Ports and Ocean
Transportation, including the Saint
Lawrence Seaway

Great Lakes Transportation System

Inland Waterways
7
The MTS Handled 2.3 billion
Tons of Cargo in 1999
Domestic
48%
International
Cargo
52%
8
In Addition to Cargo Transportation,
the MTS Also Consists of:



168 Ferry Systems operating in the
US
Commercial Fisheries -- 4.6 million
tons of fish landed at US ports in 1999
Travel and Leisure – 8.3 million
passengers boarded cruise vessels at
US port facilities
9
The Marine Transportation System is
Vital to the US Economy



2.5 million jobs directly or indirectly
supported by the MTS
4.9 million jobs in the US supported
by the production of the products
exported via the MTS
These 7.4 million jobs account for
nearly 6% of US jobs
10
Impact of International Trade
Transported by the MTS





1.1 million total direct, induced and
indirect jobs
$44 billion of direct, induced and
indirect personal income
$56 billion of direct transportation
services revenue
$11.1 billion of Federal taxes
$5.1 billion of state and local taxes
11
The MTS Moved $182 Billion of
Export Product to Foreign Markets

4.9 million Americans are employed in
the production of the exports:
• 840,000 jobs in the agricultural sector
• 757,000 jobs in the electronics
manufacturing sector
• 620,000 jobs with automobile production
sector
12
The Value of the Inland
Waterway System


12,000 mile network of navigable
waterways in the US with a
replacement value of $125 billion
51% of nation’s oil refineries located
along the inland waterways
13
The Value of the Inland Waterway
System

States bordering the Mississippi,
Illinois, Ohio, and Missouri River
System are responsible for:
• 82% of the nation’s corn
• 77% of the soybeans
• 32% of the wheat
14
The Inland Waterway System Provides a Cost
Effective and Environmentally Friendly
Alternative to Surface Transportation
Truck
Rail
Barge
0
100
200
300
400
500
600
Ton Miles per Gallon of Fuel
15
Implication #1: The efficient
performance of the MTS is critical
for the future competitive position
of the US and the State of Indiana
in international trade. However,
both structural and non-structural
constraints could impact future
performance.
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Structural Constraints/Issues
-- Deepwater Ports

Channel Depth
• Post Panamax ships require depth
of 45 ft. or greater



Only 7 of the nation’s deepwater ports
have channel depths in excess of 45
feet
Capital investments are needed to
provide deeper harbors
Maintenance dredging is a key expense
17
Existing Channel Depths
18
Source: JWD
Terminal Infrastructure is
Strained
• Terminal capacity constraints appear with growing
demand -- 8-10% annual growth in trade,
particularly in the West Coast/Southern California
port range:




Productivity gains less than in US
manufacturing
Low density utilization of US container ports,
inefficient use of scarce land
Capacity issues at container terminals
exacerbate productivity
Technology adaptations will eventually lead to
better capacity utilization
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1,000 TEU's/Acre
The US Lags in Terminal
Densification
20
18
16
14
12
10
8
6
4
2
0
Source: JWD
PONYNJ
Oakland
Seattle/Tacoma
Charleston
Vancouver, BC
LA/LB
Hamburg
Antwerp
Rotterdam
Yokohama
Busan
Felistowe
Singapore
Kaohsiung
Hong Kong
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Structural Constraints/Issues Inland Waterways

Small size of locks increases
congestion, in turn impacting
transit times and carrying costs
• 15% of locks are 1,000-1,200
ft. long
• 60% are 600-900 ft. long
• 25% are less than 600 ft. long
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Structural Constraints/Issues Inland Waterways



1,200 ft. lock can accommodate 17 barge
tow compared to 8 barge tow for 600 ft. lock
Majority of tows on Mississippi are 12 barge
tows -- tows must be split to navigate
smaller locks
50% of the locks are 50 years of age or
older
22
Structural Constraints/Issues -Inland
Waterways


National Corn Growers Association
reports lock delays on the Upper Miss.
cost farmers $94 million per year in
the mid 1990’s
2020 losses could amount to $384
million annually if locks are not
replaced
23
Non-Structural
Constraints/Issues - Security

Security costs competing for
infrastructure funding:
• Optimal level of inspections and
security measures -- commercial vs.
security trade-off’s
24
Non-Structural
Constraints/Issues - Security

Impact on logistics strategies:
• Increasing inventories -- costly
• Impact on distribution strategies -decentralization vs. centralization
• Supply chain interruptions -- plant
closures
• Increased dependence on domestic
sourcing -- infrastructure of waterways,
highway and rail are key!
25
Non-Structural Constraints/Issues -Labor Issues and West Coast Work
Stoppage


Labor work stoppages/slowdowns
have increased in frequency in last 23 years:
Most pronounced -- West Coast Dock
Shutdown and work slowdowns -Taft-Hartley outcome
26
The West Coast Port Shutdown,
September 29, 2002 -- 11 days


Vessels delayed about 25 days on average
• Lost one full rotation
• Daily cost $15,000-$40,000 per ship
• 3 key carriers reported $30 million loss
Marine terminals
• Lost wages for hourly workers --11 days
• Fixed operating costs of terminals
continued
• Productivity reduced for 5-7 weeks
• Railroads did not accept bulk cargoes
27
The West Coast Port Shutdown


Trucking
• Turn times more than tripled for 5-7 week
period
• Truck turns per driver reduced to 1 per
day -- lost income and withdrawal from
industry
Freight consolidators
• Closed during shutdown
• Need for additional space -- remote
storage, increased drayage, inventory
carrying costs increase
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The West Coast Port Shutdown
Railroads

Intermodal and bulk trains serving West Coast halted
during shutdown:
• equipment demurrage charges
• shortages of equipment
• domestic repositioning issues
• Need to find siding for 150 miles of trains during
11 day period
• Locomotives not allocated properly
• Quota system established by railroads after reopening to allocate rail cars to ports
• One railroad reported a $4-$5 million loss during
shutdown
29
The West Coast Port Shutdown
Importers/Exporters

11 days shutdown resulted in 3-4 weeks of
delay in products:
• Lost sales -- 10%-15% of imports lost during
shutdown
• Inventory carrying costs


Use of air cargo (10% of shoes, apparel,
toys and electronics) -- 10-15 times ocean
freight rate levels
Diversion to East Coast for 2% of daily
imports at 50% increase in costs
30
The West Coast Port Shutdown
Importers/Exporters


Retail sectors hardest hit:
• Apparel
• Toys
• Electronics
Auto industry suffered key impacts in terms
of plant closings:
• NUMMI in Fremont, CA
• Honda in Lincoln, AL
• Mitsubishi in Illinois
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The West Coast Port Shutdown
Importers/Exporters



Shutdown resulted in 5% market share
loss for US grain exports ($135 million
loss)
Banana importers lost more than $1
million in banana sales due to spoilage
Meat exporters incurred increased
refrigeration and storage costs
32
The West Coast Port Shutdown,
September 29, 2002 -- 11 days
In summary

5-7 weeks of follow-on impacts

$15.6 billion cost to the economy

20,147 full-time jobs lost
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Implications
•
•
•
Specific investments in infrastructure and
technology are required to just maintain the
MTS.
Improvements in efficiency of the system
are necessary to position the MTS for its
growing role in international and domestic
trade.
Exporters and importers must develop
contingency plans to deal with security
issues and labor uncertainties.
34
The Ports of Indiana are Well Positioned
to Participate and be a Leader in the
Marine Transportation System

The Port of Burns Harbor provides a
gateway for:
• International cargo
• Trans-lake cargo
• Domestic cargo
35
The Ports of Indiana are Well Positioned
to Participate and be a Leader in the
Marine Transportation System

The river ports at Southwind and
Clark Maritime Center provide low
cost transportation for steel
(domestic and international), coal,
grains, other raw materials
36
The Ports of Indiana are Well
Positioned

The Indiana Ports System can
provide valuable transportation
logistics services to improve the
competitive position of Indiana
in international trade
37
The Ports of Indiana are Well
Positioned

Potential to move trucks off
congested highways:
• Ferry services on the Lakes
• Synergy between the river system
ports and Burns Harbor could
provide alternatives to truck and
rail transportation
38
Immediate Constraints/Issues
Facing the Indiana Ports System

Limited draft on the Seaway

9 month shipping season



Competition with coastal ranges and rail
infrastructure -- capitalize on intermodal
opportunities to compliment marine system
Dependence on the steel industry at Burns Harbor to
drive international trade -- Diversify maritime
markets
Conflict between international transportation and
logistics interests and the domestic steel industry –
Section 201 Steel Tariffs.
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