The Panama Canal Expansion is due to be completed by the end of 2014 / start of 2015. It will massively affect trade between Asia & the US, given the accessibility larger ships will then have directly to US Gulf and East Coast ports. The expansion will allow Post Panamax ships that can carry up to 12,500 TEU (20 foot containers) to transit the Panama Canal, the current limit for Panamax ships is 4,800. This is basically a 160% increase in the capacity of container ships that can transit the Panama Canal. This also applies to bulk ships used to transit ores, grains & coal, as well as to LNG and Oil tankers. It is going to open up significant traffic for East Coast & Gulf ports. In this presentation the impacts of the Panama Canal on the US, its' ports, supply chains are looked at. As well as importantly the impact it could have for investors in various assets.
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4. Panama Canal Expansion
• Panama Canal $5.2bn expansion project to be completed end 14/ early 15
• Currently 14,000 ships pass the Panama Canal transiting 275m tons, annual
throughput capacity to increase to 600m tons post Expansion
• Currently Panamax Ships with capacity limit of 4,800 TEU (20 ft container units) can
pass the Panama Canal’s current locks
• After expansion Post & Super Post Panamax Ships up to 12,500 TEU will be able to
pass, 160% increase in capacity of ships that can pass the Canal.
Hugely Significant for Global Freight, Global Trade Routes, US Ports, US Supply Chains,
US Cities, Warehousing, Distribution Centers, Manufacturing bases, Industrial &
Residential Real Estate, Railways, Truckers…
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6. Panama Canal Expansion
Huge increase in ships that can travel through expanded Panama Canal:
1) Post Panamax Container ships which represent 50% of world’s total
container shipping capacity
2) Crude Oil Tankers that represent up to 40% of world’s capacity
3) LNG tankers that represent 90% of global capacity
4) Dry Bulk Carriers that represent 80% of global capacity
Expansion plays into trend of larger container ships displacing smaller ships
Note in 2000 Average Ship Size was 2,900 TEU, in 2012 was 6,100. With
50% of ships on order 10,000 TEU+ this is set to continue due to large
Economies of scale available in using larger ships
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7. Implications for US
• Expansion will open up Gulf and East Coast Ports to significantly more trade &
accelerate traffic growth given that larger vessels & a larger proportion of global
shipping fleet will be able to transit the Canal.
• Currently 80% of Asian Imports into the US come via West Coast ports ; set to
change significantly given accessibility of larger ships to the Gulf / East Coast Ports
& Population Centers.
• Efficiency Gains & Costs Savings will be available by shipping directly to East coast
and Gulf ports to access Mid-West and East Coast population centers.
• Shippers will be able to bypass often congested West Coast ports to ship directly
to Gulf & East coast region
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10. Implications for US
• Average Freight Transit Times: Asia to West Coast US 12.3 days by ship, Transit
time from West Coast to East Coast via US intermodal system another 6 days so
18.3 days in total.
• Asia to East Coast directly via Ship using Panama Canal 21.6 days. More time BUT
Cost efficiencies as all water route
• Reliability of shipping from Asia to East coast via Panama Canal is another major
competitive advantage versus shipping to West coast & using inter-model system
to reach East Coast. Schedule Reliability is very important for shippers & their
customers.
• Expansion will relieve congestion at the Canal which raises costs for shippers &
customers. During peak season it is not uncommon for vessels to wait 10 days to
transit canal at cost of $50,000 idle cost per day
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12. Implications for US Ports
• East & Gulf Coast Ports are gearing up to be Post Panamax Ready; defined as a
channel depth of 50 feet net of usable tide, as well as sufficient docking & crane
facilities
• East Coast & Gulf coast ports & railroads are deepening harbors, raising bridges,
improving tunnels & railways, increasing dock facilities, installing new cranes to
accommodate larger ships & much greater cargo volumes
• Most competitive regions, ports & systems will end up with the greatest cargo…
stealth arms race underway leading to increased investment
• East Coast Ports most likely to benefit will be those serving ‘as interstate retail
distribution centers for Asian imports such as Norfolk, Charleston & Savannah’
quote from US Army Engineer Institute for Water Resources
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15. Select US East / Gulf Ports ready for larger
vessels by 2015
• New York / New Jersey: 2nd
busiest US port with 5.6m TEU p.a.
At 50 foot depth already, will be ready once Bayonne Bridge lifted to 215 feet to
accommodate post Panamax ships
• Norfolk, Virginia: 7th
busiest US container port with 2m TEU p.a. Currently Post
Panamax ready
• Baltimore, Maryland: Currently Post Panamax Ready. 650k TEU p.a
• Charleston, South Carolina: 9th
busiest US container port with 1.35m TEU p.a. At
high tide can accommodate ships with 50 feet draft so technically already ready.
• Houston, Texas: 2.1m TEU containers p.a & important for bulks & petrochemicals
• Mobile, Alabama: Important for bulks transited down via Mississippi river. Airbus
building a $600m plant in Mobile will bolster port.
• Miami, Florida: 11th
busiest US port with 950k TEU p.a. Huge for cruise traffic.
Dredging to deepen port to 50 feet. Tunnel being built under Biscayne Bay to
connect Port facilities & interstate highways.
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16. Select US Ports likely ready post 2015
•Savannah, Georgia: 3rd busiest US port with 3m TEU per annum. Anticipated ready
by 2016.
•Jacksonville, Florida. Disney committed to directing all imports through the port
•Wilmington, NC
•Tampa, Florida: Largest fertilizer export port globally
•New Orleans, Louisiana: Important port for bulks transited down via the Mississippi
river
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17. Implication for US Railways
• US intermodal system (rail, truck, waterways) needs to remain competitive &
accommodate extra cargo; this is spurring investment. For example:
• Florida East Coast Railway: Investing in on-dock rail facility at Port Miami to be
ready 2014. Allow double stack containers directly to Jacksonville in under 9 hours
• CSX: National Gateway Project to create more efficient double-stack route
between mid Atlantic Ports & Mid west.
• Expanded on-dock rail facility at Savannah
• New near dock, inter-modal facility near Port of Baltimore
• Connectivity with Ports good, expanding inland capacity to handle extra cargo
• Norfolk Southern: Heartland Corridor Project enable Double Stack Freight by
increasing clearances through 30 channels between Virginia Ports & Mid West;
taken 250 miles of route between Hampton Roads, Virginia to Chicago
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Norfolk Southern: Investing in Crescent Corridor to connect Louisiana & New Jersey. Will
move containers more efficiently from the Gulf to major distribution & population centers
20. Implications for US Waterways & Grain exports
• Lower Mississippi Ports like New Orleans & Mobile significant for export of dry
bulks like grains, ores, coal brought down by the river. 40m tons of grains brought
each year from Midwest for export via Mississippi
• 25% of all traffic going through Panama Canal from Atlantic to Pacific is Grains.
30% is petroleum products & chemicals. Huge scope to increase with expansion
• Shale Gas revolution to combine with PC expansion to increase LNG export
potential. Recent announcement of LNG terminal in Texas
• Post Expansion, in terms of Bulk Vessels Post Panamax & Capesize carriers will be
able to transit, increasing the tonnage that can be transported on any one ship
from current limit of 80,000 to 200,000 tons.
• More efficient Cape Class ships could reduce cost of exporting grain to North East
Asia from the US Gulf ports by a significant $0.35 per bushel
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23. Implication for US Supply Chains
• Retailers & manufacturers will remake supply chains to benefit from reduced cost
& higher reliability of transit to East Coast Gulf ports near major population
centers
• Investment in Distribution Centers and Manufacturing plants near growing South
East & Gulf transit hubs happening and will increase, for example:
• Ashley Furniture seeing export opportunities from Mid-Atlantic & frustrated by
rail freight delays at Chicago built 3.3m manufacturing & warehouse facility in
North Carolina.
• Airbus building plant in Mobile, Alabama & Boeing in Charleston, SC
• Industrial REIT firms such as Prologis & Eastgroup are investing in industrial and
distribution assets near East Coast & Gulf ports to benefit from increased demand
• Next slide shows clustering of Distribution Centers around Savannah, Georgia
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25. Implications for South East US & Charlotte
• Boon for South East & Gulf regional economies & cities.
• Port cities such as Charleston, Savannah, Norfolk, to benefit. Port traffic will be
further helped by new manufacturing facilities such as Airbus (Mobile), Boeing
(Charleston)
• Aside from the ports cities, Charlotte, North Carolina to benefit as regional
economic hub and major freight, transport distribution center between the coastal
ports of the Gulf / Mid Atlantic & population centers of East Coast & Mid West.
• Charlotte is connected to Charleston, Savannah, & Wilmington by Norfolk
Southern Railway & freight line capacity is being expanded on these routes.
• Heavy Investment underway in Charlotte: New Intermodal Center at Charlotte-
Douglas Airport will connect to ‘Crescent Corridor’ Rail Freight services allowing
250,000 container throughput capacity per annum
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26. Investment Implications
• Significant boon for railways, truck companies active in South East & Gulf region.
• Logistics firms to benefit as more complex freight patterns and options increases
their customers’ desire to have 3rd
parties handle complicated logistics
• Increase demand for Manufacturing Bases, Distribution Centers, Warehousing
Facilities to benefit value of industrial assets, land and industrial REITs active in
the Gulf, Mid-Atlantic regions.
• Strengthens trends of SIGNIFICANT FLOW of labor and capital into the South East
US …
• Residential Real Estate in cities that are impacted will benefit
• Suppliers of port and rail infrastructure & equipment to benefit
• Shippers who can reallocate ships to new routes will benefit
• Agrarian plays & exporters in US to benefit
• Bulk, container & freight markets will be severely disrupted resulting in huge
winners and losers.
• STRENGTHENS EVEN FURTHER CONVICTION THAT GENESIS IS PURCHASING
RESIDENTIAL ASSETS IN THE RIGHT REGION OF THE US AT THE RIGHT TIME
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