Ports Under Pressure

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

British Maritime Technology 1

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
140

120

MTEU shipped 100

80

60

40

20

0
1980 1990 1995 2000 2002 2004 2006 2008 2010

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.
Forecast LNG Supply-Demand Balance 2003-2010

240

220

200
million tonnes

180

160
Forecast Demand
140
Identified Supply
120

100
2003 2004F 2005F 2006F 2007F 2008F 2009F 2010F


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.
100
676 new vessels 3.7 Million additional
80
60
vessel slots, approx 1,200
980 new vessels 40
vessels
80 new vessels
20
0
rs lk ers G
nk
e Bu n LN
Ta n tai
Co

% of New Orders to 2008 vs. Existing Fleet

 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.


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
 In 1995, only 5 ports
were above the 3 Selected Container Port Traffic
Million TEU mark 1999-2001-2003
25
 More than 20 ports
nowadays pass this 20
Millions TEU
mark 15

 Of which 11 are in Asia 10

 Extra Rapid Growth 5

registered in Shenzen,
0
Shangai, Tanjung on
g
o re
ng
h ai
nz
en /LB da
m
-K ap he LA R'
ng ng ha
Pelapas and Quingdao Ho Si S S

 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


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


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