The Panama Canal Expansion: Potential Impact on Logistic and Supply Chains

Onsimo V. Snchez
Office of Market Research and Analysis June 2012

Construction of the Panama Canal was a GAME CHANGER for World Trade

1915 2011 Total Number of Transits: 1,015,656 Amount of Cargo: 8,810,111,605 LT

Principal Users of the Canal FY 2011 (in Million Long Tons)

USERS United States China Chile European Union Japan South Korea Peru FY 2010 135.3 43.6 26.7 26.8 22.7 19.1 12.9 FY 2011 144.4 53.1 28.9 24.2 22.6 19.1 15.3 2011 (%) 65 24 13 11 10 8 7
Source: Compair Data, October 2010

Relative Importance of the Canal on the International Seaborne Trade of Countries in the Americas 2011

80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

Seaborne Exports
Source: ACP with information of IHS, Dec 2011

Seaborne Imports

Tonnage by Market Segments FY 2010 FY 2011

Container 79.94 72.59 34.68 33.05 48.99 46.56 12.83 14.59 10.77 10.34 9.19 7.78 11.71 11.30 0 20 40 60 PCUMS (in millions) 80 100 120 113.59 104.59

Dry Bulk

Vehicle Carrier

Tanker

Refrigerated

Passenger

FY2011 FY2010

General Cargo

Others

Liner Services Through The Panama Canal

Vancouver Seattle Oakland Tokyo Qingdao Pyongtaek Yokohama Busan Shanghai Taipei Ningbo Yantian Hong Kong Kaohsiung Chiwan New York Norfolk Los Angeles Charleston Ensenada Mobile Savannah Jacksonville Houston Miami Manzanillo Lzaro Kingston San Juan PR Cardenas P. Caucedo Pto. Quetzal P. Cabello Cartagena Cristobal Manzanillo Port of Spain Balboa Manta Guayaquil Callao Ilo Iquique Lautoka Noumea Mejillones Antofagasta San Antonio Trade Route Asia - USEC Pendulum WCSA - Europe Asia - Caribbean WCSA - Caribbean WCSA - USEC Oceania - USEC - Europe USWC - Europe Total de Servicios Number of Yearly Number of Services Capacity Vessels 12 2,854,409 112 2 8 1 1 3 2 3 32 492,021 1,210,063 236,625 45,552 431,535 796,066 489,988 6,556,259 27 58 12 3 18 16 30 276 Average Vessel Size 4,579 4,716 3,006 4,538 1,248 2,972 2,945 3,132 3,867 Hamburg Rotterdam Antwerp Dunkirk Le Havre Marin Bilbao La Spezia Naples Gioia Tauro Valencia Tilbury Tangier Dubai

Papeete

Sidney Melbourne Tauranga Auckland Napier Timaru Port Chalmers

Source: Compair Data, January October2012 2010

Port Development in Panama

1996: 2010: 2011: 2015: 2020: 235K TEUs 5.6 M TEUs 6.5 M TEUs 8.4 M TEUs (F) 12.4 M TEUs (F)

Panama Ports Company Cristobal

PSA

Colon Container Terminal

Manzanillo International Terminal (MIT)

Panama Ports Company - Balboa

6.5 million TEU, 18.5%

Transbordo en el Caribe: un tringulo

15.6%

16.4%

63.1%

4.9%

Fuente: Jean-Paul Rodrigue, Universidad deuna Hofstra, Nueva York, mayo 2012, Las economas de escala implican presentacin en tolerancia seminario de dedesvo logstica-BID, Quito, Ecuador menor

Profile of main ports in the region (movements in 000 of TEUs for 2010 and number of quay cranes)
Port name Movement in TEUs Quay cranes Santo Toms 392K 1 Puerto Barrios 326K 1 La Habana 228K 0 Freeport 1,125K 16 Caucedo 1,004K 5 Haina 288K 3 Jarry 150K 4

Puerto Cortes 583K 2 Limon /Moin 858K 1 MIT/CCT/Cristobal 2,810K 34 Kingston 1,891K 19

Acajutla 145K 0 Puerto Quetzal 583K 0

Barranquilla 103K 0 Cartagena 1,581K 12 Caldera 155K 0 La Guaira 333K 5 Puerto Cabello 800K 0 Point Lisas 184K 2 Port Spain 389K 5

Balboa/PSA 2,758K 25

Buenaventura 662K 4

Produccin: Servicios del Clster (2008 Millones)

Code CFZN CNOP PORT AGNT CHTR MFUL LINE MMER CRUS XPRC LEGL BRPR ITMS RAIL BOAT PPLN PILO KNOW CLAS CNTR DREG Total:

Description Zona Libre de Coln Operacin del Canal Puertos Agencias Navieras Operadores de Turismo en el Cana Combustible Marino Lneas Navieras Marina Mercante Cruceros Zonas Procesadoras de Exportacin Servicios Legales Reparacin y Mantenimiento de Ba Servicios Intermodales Ferrocarril Suministro a Barcos Oleoducto Transstmico Servicios de Pilotaje Ciudad del Saber Clasificacin de Naves Reparacin y Mantenimiento de Co Dragado

Y0 1,942.2 1,623.7 525.1 278.5 239.2 216.7 167.7 146.6 123.8 118.2 110.2 86.1 77.4 46.3 31.9 29.1 25.3 22.8 14.7 2.6 0.5 5,828.7

X0 2,261.7 1,623.7 502.4 329.4 239.2 292.9 153.4 146.6 123.4 129.8 136.9 86.1 74.9 38.3 31.9 29.1 25.3 23.2 14.7 2.6 0.5 6,266.2

El comercio global continuar

Canal Expansion Program Components

Deepening of Pacific and Atlantic entrance channels Deepening and widening of the Gatun Lake navigation channel Construction of new access channel for Pacific Locks Construction of new Post Panamax Locks and water saving basins in the Atlantic and the Pacific Increase the maximum operating level of Gatun Lake

The Panama Canal - 2014

Its all about economies of scale!

It is all about economies of scale, improving efficiency, productivity, and profitability Operational Efficiency Fuel Efficiency Improve Vessel Utilization Competitiveness

19

It is all about economies of scale, improving efficiency, productivity, and profitability Price: Supply/Demand Driven Profitability: Improve Financial Efficiency Environmental Sustainability

20

Ripple Effects and Other Factors Ports: Ready/not Ready Adequate Rail/Road Connections Land Value: Adjacent to Ports Transshipment (Caribbean Triangle) Logistics/Supply Chain (Near Sourcing) Value of Ships - Charter Rates

21

Locks and vessels sizes

Existing locks' maximum vessel size: 4,400 TEU
33.5 m (110)

32.3 m (106) 12.4 m (39.5) 55 m (180)

12.8 m (42) 49 m (160)

18.3 m (60) 15.2 m (50)

New locks' maximum vessel size:

12,600 TEU

Main Global Container Transportation Flows

Southeast Asia

South Asia

East Asia

POSTPANAMAX
Eastbound Route

Westbound Route

Landbridge
PANAMAX

Panama Route

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Main Global Container Transportation Flows

Southeast Asia

South Asia

East Asia

POSTPANAMAX
Eastbound Route

Westbound Route

Landbridge

POSTPANAMAX

Panama Route

24

Impact of Expansion on Container Services (Lines Perspective)

Panama provides easy access to consumers located in Latin America, the Caribbean, North America, Asia and Europe

The expansion will extend the Canals area of influence

Mxico +18.9% Pop: 135M Guatemala, El Salvador, Belice, Honduras, Nicaragua. +28.0% Pop: 19M

Caribe, Cuba, Puerto Rico, Repblica Dominicana, Jamaica, Hait +11.0% Pop: 42M Costa Rica, Panama +23.0% Pop: 19M

Latinamerica Population / Growth Projection 2010-2030

Colombia, Venezuela +22.0% Pop: 88M

Ecuador, Per, Bolivia, Chile +20.0% Pop: 85M Uruguay, Paraguay, Brazil, +18.0% Pop: 251M

OVERALL POPULATION +19%, 700M

Argentina,+17.0% Pop: 48M

SOURCE: US CENSUS: International Database

Retail Sourcing Trends

2011 Top Sourcing Locations
China Vietnam India Mexico Indonesia Bangladesh Thailand Sri Lanka Korea EU Central America
Casey Chroust, EVP, Retail Operations Retail Industry Leaders Association
31

3/15/2012

Latin America By The Numbers

59% of retailers said their supply chains include distribution to and from Latin America 25% currently have retail operations in Latin America 30% currently have distribution operations in Latin America 58% consider entering or expanding Latin American operations in the next five years
Note: RILA Member Survey
3/15/2012 32

Fuente: The Economist

Potential Post Panamax Trade Crude Oil

117,055 DWT Aframax

Crude oil: Ecuador US Gulf Panama: 2,047 nm Magellan Strait: 10,972 nm Savings 8,925 nm ,15 knots, 26 days less

Potential Post Panamax Trade LNG

PostPanamax Cargo capacity: 145,000 m3

LNG: Trinidad & Tobago Quintero, Chile Panama: 3,782 nm Magellan Strait: 6,750 nm Savings 2968 nm, 19.5 knots, 6.3 days

Network Economics
LONG DISTANCE & HIGH DENSITY : LARGE VEHICLE SHORT DISTANCE & LOW DENSITY: SMALL VEHICLE N C W C S E N

S
36

Conventional

Direct
North Atlantic

Central Atlantic

South Atlantic / Gulf

Transshipment
North Atlantic

Circum-Equatorial
North Atlantic

Central Atlantic

Central Atlantic

South Atlantic / Gulf Caribbean Transshipment Triangle

South Atlantic / Gulf

Source: Jean-Paul Rodrigue, PHD

37

El puerto como un componente de la cadena de transporte

FORELAND PUERTO HINTERLAND

Corredores de

Apilamiento

Redes de transporte

Operaciones del muelle

Operaciones del puertoTerminales internas

transbordo

Zonas de logstica

Fuente: Jean-Paul Rodrigue, Universidad de Hofstra, Nueva York, mayo 2012,

Cul es la importancia del transporte trans-pas?

Fuente: Jean-Paul Rodrigue, Universidad de Hofstra, Nueva York, mayo 2012, presentacin en seminario Logstica-BID, Quito Ecuador

Distancia

Costo

10% Puerto

80% 90%
TRANS-PAS

ANTE-PAS

20%

Comercio internacional, cadenas y flujos de transporte: De la facilitacin a las cadenas de suministro:

Comercio internacional Origen
Procedimientos aduaneros

Destino

B
Descomposicin

Facilitacin del comercio

Cadena de transporte
Ferroviaria Red Aduana Martima

A
Composicin Transbordo Puerto

B
Centro de distribucin

Facilitacin del transporte

Flujos fsicos

A
Patio ferroviario Centro de transbordo

Facilitacin de la logstica

Fuente: Jean-Paul Rodrigue, Universidad de Hofstra, Nueva York, mayo 2012, presentacin en seminario

Componentes del ndice de Desempeo Logstico, pases latinoamericanos seleccionados, 2010

Fuente: Jean-Paul Rodrigue, Universidad de Hofstra, Nueva York, mayo 2012, presentacin en seminario Logstica-BID, Quito Ecuador

GAME CHANGERS REQUIRE STRATEGIC PLANNING

Onesimo V. Sanchez Office of Market Research and Analysis Panama Canal Authority