FUTURE OF THE GLOBAL ECONOMY AND INTERNATIONAL TRANSPORTATION: WHICH...
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FUTURE OF THE GLOBAL ECONOMY AND INTERNATIONAL TRANSPORTATION:
WHICH ROAD WILL LATIN AMERICA TAKE?
Robert West
+1 617 309 052130 November 2016
Merida, Yucatan
Soc. Port. de Buenaventura
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Over 25 Years of industry experience…
Outsourcing of labor intensive engineering services at hourly rates 45 % - 65 %
lower than U.S commercial rates.
Specialized consulting for infrastructure with an emphasis in
ports and harbors.
Processing Big Data to provide international trade business intelligence to
increase and your market share, with two successful products, DuPort Data for ports DuTrade Data for enterprises
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Buenaventura Challenge
60,000 TEUs
731,000TEUs
Tran
ssh
ipm
en
t
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Buenaventura Project
Aerial reconnaissance with Drones
for port planning and design
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Topics
5
THE WORLD – Is there growth out there?
WHERE ARE THE WEAK SPOTS & THREATS??
BIGGER SHIPS AND THE CANAL EXPANSION
TRANSSHIPMENT IS ALIVE AND WELL
ECO
NO
MY
LATI
N A
MER
ICA
PO
RTS
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The world outlook is . . .
Improving slowly
Source: Economist Intelligence Unit, IMF July 2016 World Economic Outlook
2015 2016 2017
Real GDP (%) 3.1 3.1 3.4
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Big picture
• North America and Europe are pulling the train
• China exports are slowing because NA + EU are slow-moving
• Hence, exports from Latin America to China have slowed
• Asia’s incomes are still very low and not big enough to fill the shoes of a slowing NA and EU
• LAM has not developed a manufacturing base and an internal consumption market – this should be a long term strategic goal for the region
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Trade’s share of the global economy is still climbing.
(World imports, percent of GDP)
Source: IHS Global Insight
Globalization trend is long-term and has not reversed or stopped
15
20
25
30
35
40
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Pe
rce
tn S
ha
re
No change
This was NOT a
reversal of
globalization
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TEU trade will continue to grow –but slower than before
World Population +0.7%
Real GDP +2.3%
Container Trade+1.0%
Total Trade +1.5%
5.5% = long term potential
Sources: DUAGAhttp://www.census.gov/population/international/data/idb/worldpopgraph.php
But ΔTEU/ΔGDP ≠ 3X
The new ratio is closer to 1,depending on the port’ssize, location, market share, willingness to invest
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Closer to home, in the short term, theeconomic outlooks are fairly positive
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Fuentes: IMF July 2016, LatinFocus, TradingEconomics,BBVA, FocusEconomics, The Economist Intelligence Unit, OECD, The World Bank, The Balance
Argentina 2.1% -1.3% +3.0%Brazil -3.8% -3.2% +1.0%Venezuela -5.7% -10.0% -3.0%
Colombia 3.1% 2.3% 2.8%Chile 2.1% 1.7% 2.2%Costa Rica 3.7% 3.8% 3.8%Mexico 2.5% 2.1% 2.5%Panamá 5.8% 5.7% 5.9%Perú 3.3% 3.7% 4.2%USA 2.5% 1.8% 3.0%Canada 1.2% 1.3% 2.0%
2015
Po
siti
veW
eak
2016 2017
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Recessions, like wars, eventually end.
11
Rea
l GD
P G
row
th
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Is the Pacific Alliance working?
OPEN TRADE
FREE MOVEMENT OF CAPITAL
FREE MOVEMENTOF PEOPLE
Mexico has a lot to teach its partners to the south – how tobuild a manufacturingbase and grow incomes
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Is the Pacific Alliance working?
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In the last 3 years, the PacificAlliance has accomplished morethan the other free-trade effortsin the last 30 years.
Population = 200 millionIncome/capita = $10,00035% of LAM GDP8th largest economy in the world
Will the US join?
Probably not!
“… emerging as one of the most dynamic ecnomic regions in the world” - IDB
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Topics
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THE WORLD – Is there growth out there?
WHERE ARE THE WEAK SPOTS & THREATS?
BIGGER SHIPS AND THE CANAL EXPANSION
TRANSSHIPMENT IS ALIVE AND WELL
ECO
NO
MY
LATI
N A
MER
ICA
PO
RTS
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Too much idle capacity
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• There are 325 ships not working = 1.5 million TEUs• 8% of the fleet capacity
• 200 of these idle ships are >3000 TEUs (61%)
• 100 Panamax ships are idle• Effect of the opening of the expanded Canal locks
• Some bigger, younger ships are being scrapped (6500 TEUs)• Only 12 years old
Source: Alphaliner Newsletter No 15, 2016 and more recent
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Hanjin Shipping -
Corporate Bond Credit Rating
Source: Alphaliner Monthly, May, 2016
Some carriers didn’t make it
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Long Term Unsecured Credit Rating History
Source: Alphaliner 2016, Issue 15Ports & Shipping News, #47, 2016
Some are buying port operations
Financial restructuring was too late to buy Hanjin
Now buying 25% ofAlgeciras
Hyundai Merchant Marine
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Deliveries down, scrapping upNet new capacity in 2016 is only 1.5%
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Source: Alphaliner, Clarksons Research
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Looks like an oligopoly
19
Alliances 2017 with 5-year Commitment Global Share
2M Maersk, MSC 29.8%
OCEAN Evergreen, OOCL, CMA CGM, COSCON 25.5%
THENYK, MOL, K-Line, Hapag-Lloyd (UASC), Yangming, Hanjin 15.7%
Source: Alphaliner, DUAGA
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Sign of life on the Transpacific!
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0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2012 2013 2014 2015 2016 2017
Transpacific Annual Container Growth
Source: JOC Container Outlook
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The “pivot” to Asia is already underway
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-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
2012 2013 2014 2015 2016 2017
Asia-South America
Source: IHS World Trade Service
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Topics
22
THE WORLD – Is there growth out there?
WHERE ARE THE WEAK SPOTS & THREATS?
BIGGER SHIPS AND THE CANAL EXPANSION
TRANSSHIPMENT IS ALIVE AND WELL
ECO
NO
MY
LATI
N A
MER
ICA
PO
RTS
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We are starting to see upsizing on the Transpacific
23
Source: Alphaliner, May 2016, Clarksons Research
• Used to be just Asia-Europe
• Effect of the Canal expansion
• Maersk expanding its service• Direct calls to Chile
• Buenaventura has received a13,000 TEU ship (MSC)
WORKHORSE
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The fleet size is slowing, while ships get bigger and bigger
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• 63% of the fleet capacity is in Neopanamx ships (>5,100 TEUs)• Panamax ships of only 10 years are being scrapped
19% 18% 31% 32%
• In 2018, the average vessel will be 4,111 TEU
Source: Alphaliner Monthly Monitor 2016 10
0
1
2
3
4
5
6
7
8
9
2015 2016 2017 2018 2019
Annual Growth of theContainer Fleet
0% 20% 40% 60% 80% 100%
2010
2011
2012
2013
2014
2015
2016
2017
2018
Fleet Composition by Size
<3000 3000-5099 5100-9999 >10000
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13,000 TEU ship calls Buenaventura
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http://www.shipspotting.com/gallery/photo.php?lid=1926676
MSC Trieste
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Maersk is building 11 new ships at 20,000 TEUs each
26
EEE
EEE-Mk-2
Alphliner Newsletter 45 2016
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Topics
27
THE WORLD – Is there growth out there?
WHERE ARE THE WEAK SPOTS & THREATS?
BIGGER SHIPS AND THE CANAL EXPANSION
TRANSSHIPMENT IS ALIVE AND WELL
ECO
NO
MY
LATI
N A
MER
ICA
PO
RTS
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The best transshipment options are now becoming clear
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P. CABELLOP. of SPAIN
RIO HAINA
SAN JUAN
CAUCEDO
Caribbean Transshipment Triangle
FREEPORT
COLON/MIT
KINGSTON
CARTAGENA
CUBA
MOINAt capacity
PANAMA
MIT (SSA)
CRISTOBAL (PPC)
COLON (Evergreen)
BALBOA (PPC)
RODMAN (PSA)
280813R3292
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Another transshipment triangle is forming - Pacific
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Caribbean
P
Pacific
LazaroCardenas
Callao
Buenaventura
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But the solution to the low rates is clear
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Cut capacity!!!!
ExampleAsia-ECSA capacity has been cut by 40%
Rates have soared!
Good news for the futureNew shipbuilding is down (only 71 new ships in Q1 2016)
Source: BIMCO “The Road to Recovery”
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Mega Ships - Who will dominate?
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Ships 18,000 – 21,000 TEUs
37
+72
2020Current and on order for 2020
Others 36
Maersk 31
COSCOCS 22
MSC 20
Source: The Loadstar & Alphaliner Monthly,, May 2016
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The mega-ships are for -
• Asia – North Europe 69%
• Asia – Mediterranean 19%88%
• Transpacific (Asia – USWC) 7%
• Asia – Mid East 5%
12%
Source: Drewry, 2015
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The Mega Ships bring higher risks for shippers
• Shippers used to spread their risk
• Multiple ships
• Multiple shipping lines
• Multiple ports
•Now, the risks are greater• FEWER lines, ships, and ports (but bigger
ones)
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Conclusions – Latin American Ports
34
• Don’t be afraid to invest• Pay attention to your property
and the hinterland – where the $value is
• Latin America - build more manufacturing strength, and export higher value products
• Ports are the key to regional integration