Texas - Global Logistics-Driven Investment

Global Logistics Global Logistics Development PartnersDevelopment Partners

Global Logistics - Potential for Texas Economic

Development

Texas Economic Development Council Spring Meeting - Sugar Land

April 28th, 2011Global Logistics Development Partners

Jonathan RedAdam Wasserman

Dr. Arnie Maltz

Texas – Investor’s PerspectiveTexas – Investor’s Perspective

From an investor perspective, we see Texas as anFrom an investor perspective, we see Texas as anincreasingly interesting propositionincreasingly interesting proposition

Large relatively wealthy marketLarge relatively wealthy market Major production and consumption regions Major production and consumption regions

Significant & growing foreign trade (#1 state - export value)Significant & growing foreign trade (#1 state - export value) Seen as business-friendly Seen as business-friendly Access to key international marketsAccess to key international markets

- Seaports - Air Cargo Airports - Class 1 Rail- Seaports - Air Cargo Airports - Class 1 Rail Proximity to MexicoProximity to Mexico

Large, fast growing market with land bridge connectivityLarge, fast growing market with land bridge connectivity Central US locationCentral US location


The State of Global LogisticsThe State of Global LogisticsGlobal cargo movement is evolving – market and geo-politicalGlobal cargo movement is evolving – market and geo-political

Input costs – OilInput costs – Oil New Infrastructure (eg. Panama Canal)New Infrastructure (eg. Panama Canal) Shifting marketsShifting markets Congestion at pinch-pointsCongestion at pinch-points Business competition not sitting idleBusiness competition not sitting idle Public PolicyPublic Policy

ResultsResults Supply chains reactSupply chains react Investment patterns evolveInvestment patterns evolve Some of this is quite obvious and some very incrementalSome of this is quite obvious and some very incremental Investors are following the trendsInvestors are following the trends


Global Logistics and TexasGlobal Logistics and Texas

Key Trends – MaritimeKey Trends – Maritime

Import trade - dominated by Asia to US (West Coast)Import trade - dominated by Asia to US (West Coast) Some trending toward supply chain diversificationSome trending toward supply chain diversification Aspirations for more cargo at Gulf Coast portsAspirations for more cargo at Gulf Coast ports Increased focus on Latin America (north-south routes)Increased focus on Latin America (north-south routes) The economic downturn has changed the gameThe economic downturn has changed the game Ports and logistics hubs becoming critical cogs in the supply Ports and logistics hubs becoming critical cogs in the supply

chainchain Not simply terminals for cargo movementNot simply terminals for cargo movement Value-add centersValue-add centers Distribution hubsDistribution hubs

Global Logistics and TexasGlobal Logistics and Texas

Key Trends – RailKey Trends – Rail

Massive investments in rail infrastructureMassive investments in rail infrastructure Increased efficiency Increased efficiency North-south routes becoming more importantNorth-south routes becoming more important Intermodal activity is the driverIntermodal activity is the driver

Texas Transport InfrastructureTexas Transport Infrastructure

As comprehensive as any other stateAs comprehensive as any other state

16 member seaports ranging from Orange in the north to 16 member seaports ranging from Orange in the north to Brownsville in the south.Brownsville in the south.

41 Short Line Railroads serving regional customers41 Short Line Railroads serving regional customers

11 Interstate Highways covering over 3700 miles of 11 Interstate Highways covering over 3700 miles of roadwayroadway

World-Class Air Cargo handling Facilities and nationally World-Class Air Cargo handling Facilities and nationally recognized Alliance Airportrecognized Alliance Airport


Economic Contribution of Texas Economic Contribution of Texas Seaports and RailroadsSeaports and Railroads

Texas PortsTexas Ports Over 500 million tons (GIWW 73 million tons)Over 500 million tons (GIWW 73 million tons) 1 million jobs1 million jobs $48 billion in personal income$48 billion in personal income $135 billion in total economic benefit$135 billion in total economic benefit

Texas RailroadsTexas Railroads Over 335 million tons 18,000 jobs $1.1 billion in personal income Orig. or term 25% of rail movements in TX Serve 11,500 customers/facilities


Texas Texas 3 Very Different Logistics & Trade Products3 Very Different Logistics & Trade Products

Rail Interconnections & Rail Interconnections & Intermodal CapabilityIntermodal Capability

All Short Line Railroad connects with All Short Line Railroad connects with at least one of the three Class 1’s:at least one of the three Class 1’s:

- UP- UP

- BNSF- BNSF

- KCS- KCS 12 Texas ports have Class 1 Rail 12 Texas ports have Class 1 Rail

Service. UP is the number one Service. UP is the number one connectorconnector


Texas Port Region Texas Port Region

Various ports with various strengthsVarious ports with various strengths Service to international/domestic markets Service to international/domestic markets Ports want cargo, revenue and vessel callsPorts want cargo, revenue and vessel calls Port marketing is all about international tradePort marketing is all about international trade

How well do you know what is going on “inside the gate” at How well do you know what is going on “inside the gate” at the port in your region?the port in your region?

How well do you know the opportunities down the line, how How well do you know the opportunities down the line, how many of the short line’s customers are your port’s many of the short line’s customers are your port’s customers?customers?

How do you add value to the process in your area?How do you add value to the process in your area?


The Outlook-Panama Canal The Outlook-Panama Canal WideningWidening

Import cargo traffic for Texas, Mid-South, Import cargo traffic for Texas, Mid-South, Midwest may be diverted from LA/Long BeachMidwest may be diverted from LA/Long Beach Assumes adequate Gulf port facilitiesAssumes adequate Gulf port facilities North-South highway linkages will be importantNorth-South highway linkages will be important I-35 Corridor may see additional trafficI-35 Corridor may see additional traffic

Exports to Asia - another source of increased Exports to Asia - another source of increased freight from & through TX vs. west to Californiafreight from & through TX vs. west to California


Texas Inland RegionTexas Inland Region

Large “domestic” Texas marketsLarge “domestic” Texas markets Great multi-modal storyGreat multi-modal story Strategic geographyStrategic geography

How well do you know the customers of your short How well do you know the customers of your short line railroad?line railroad?

How well do you know the opportunities down the How well do you know the opportunities down the line, how many of the short line’s customers are port’s line, how many of the short line’s customers are port’s customers?customers?

How do you add value to the process in your area?How do you add value to the process in your area?


Texas Border RegionTexas Border Region

Mexico Trade ReboundsMexico Trade Rebounds

2010 Trade up 25.5% over 20092010 Trade up 25.5% over 2009Imports $259B (up 26.5%)Imports $259B (up 26.5%)Exports $110B (up 24.5%)Exports $110B (up 24.5%)

Three Texas ports account for Three Texas ports account for 65%65% of of US/Mexico TradeUS/Mexico Trade Laredo 38%Laredo 38% El Paso 19%El Paso 19% Pharr 9%Pharr 9%


Texas Border Region - International BorderTexas Border Region - International Border


Texas Border Region Texas Border Region The Fuel Cost FactorThe Fuel Cost Factor

As fuel costs increase, companies are As fuel costs increase, companies are re-evaluating supply chain elementsre-evaluating supply chain elements

Effects:Effects: More rail out of Mexico and further into the U. S.More rail out of Mexico and further into the U. S. Premium on efficient facilities to smooth import and export Premium on efficient facilities to smooth import and export

processprocess

Fuel costs will make Mexico more attractive for Fuel costs will make Mexico more attractive for manufacturing vs. Asiamanufacturing vs. Asia


Texas Border Region Texas Border Region The Outlook-Near ShoringThe Outlook-Near Shoring

Anecdotal reports of repatriation from Anecdotal reports of repatriation from ChinaChina

Possible labor source as U. S. agesPossible labor source as U. S. ages Infrastructure improvements in Mexico are Infrastructure improvements in Mexico are

happening, but slowlyhappening, but slowly


Texas Border Region Texas Border Region Regulatory Factor: The Outlook for Regulatory Factor: The Outlook for

Mexican Truck Drivers in the USMexican Truck Drivers in the US

Mandated by NAFTA although bitterly fought by Mandated by NAFTA although bitterly fought by some US interestssome US interests

Modest participation from Mexican carriers, Modest participation from Mexican carriers, initially (29 signed up for pilot of 2007-2009).initially (29 signed up for pilot of 2007-2009).

May have the effect to move goods handling May have the effect to move goods handling away inland to other logistics and manufacturing away inland to other logistics and manufacturing and distribution pointsand distribution points Potential for “LandPort” development 150-500 miles Potential for “LandPort” development 150-500 miles

from the borderfrom the border Could improve economics of US manufacturing Could improve economics of US manufacturing

with Mexican supplierswith Mexican suppliers Global Logistics Global Logistics Development PartnersDevelopment Partners

Case Study ExampleCase Study Example

Brownsville & Rio Grande Intl RailroadBrownsville & Rio Grande Intl Railroad

33 miles connecting Port of Brownsville 33 miles connecting Port of Brownsville with the UP and trackage rights to BNSFwith the UP and trackage rights to BNSF

Connects with the UP in Olmito near Connects with the UP in Olmito near HarlingenHarlingen

54 listed customers54 listed customers


Brownsville Rio Grand CustomersBrownsville Rio Grand Customers Amfels, Inc.Amfels, Inc.

Angelo InternationalAngelo InternationalTexas Recycling, Brownsville, TXTexas Recycling, Brownsville, TXBrownsville Gulfside Warehouse, Brownsville, Brownsville Gulfside Warehouse, Brownsville, TXTXBrownsville Navigation DistrictBrownsville Navigation DistrictBP Marine AmericasBP Marine AmericasBrownsville Machine ShopBrownsville Machine ShopBrownsville RefineryBrownsville RefineryChemUSA CorporationChemUSA CorporationU. S. ClayU. S. ClayCommercial MetalsCommercial MetalsCTC North AmericaCTC North AmericaDix Shipping, Brownsville, TXDix Shipping, Brownsville, TXDuro Paper Bag Co. Brownsville, TXDuro Paper Bag Co. Brownsville, TXFrontier ServicesFrontier ServicesG B Freight ForwardingG B Freight ForwardingGeneral ForwardingGeneral ForwardingGulf Stream MarineGulf Stream MarineGreenbriar Leasing, Lake Oswego, TXGreenbriar Leasing, Lake Oswego, TXGulf Facilities, Brownsville, TXGulf Facilities, Brownsville, TXGulf Port Services, Inc.Gulf Port Services, Inc.Gulmar, Brownsville, TXGulmar, Brownsville, TXInterfabInterfabInterlube Corporation, Brownsville, TXInterlube Corporation, Brownsville, TXINSCOINSCOInternational ShipbreakingInternational ShipbreakingInternational CommoditiesInternational Commodities


Inter-Transfer, Inc., Brownsville, TXItapco-Border Terminal, Brownsville, TX)Itapco-Brownsville Terminal) TransmontagneItapco-Tejano Terminal)Mobile Mining & Minerals Co.Open Sesame Commodities, Inc.Parker & CompanyPlitt Crane ServicePremier ServicesPort Elevator, Brownsville, TXPetro Liquids Corporation, Brownsville, TXChem USAPublic Utilities BoardR. M. Walsdorf CompanyRoll & HoldRTS InternationalSatellite I, Inc.Schaefer StevedoringStatia Terminals, Brownsville, TX - TransmontagneSouth Texas Grain, Brownsville, TXSouthern Wood ProductsTexas International Railway, McAllen, TXTOF CorporationTransforma Marine, Brownsville, TXWestway Trading, Brownsville, TXTranco Rail Services

Harlingen Rail ConnectionHarlingen Rail Connection

Rio Valley Switching Company-UPRio Valley Switching Company-UP

Connects Harlingen to Border Pacific RR Connects Harlingen to Border Pacific RR in Mission, Texas (41 miles)in Mission, Texas (41 miles)

175 customers175 customers


The ReachThe Reach

Brownsville Rio Grande RR to the UP near Brownsville Rio Grande RR to the UP near Harlingen. 33 Miles, 54 customersHarlingen. 33 Miles, 54 customers

Harlingen Switching Railroad 41 miles to Harlingen Switching Railroad 41 miles to Mission, Tex. 175 customers. Connects Mission, Tex. 175 customers. Connects to Border Pacific International Railroadto Border Pacific International Railroad

Border Pacific Railroad extends 31 miles Border Pacific Railroad extends 31 miles to Rio Grande Cityto Rio Grande City


Port of BrownsvillePort of Brownsville Deep Water Port with substantial land holdings Deep Water Port with substantial land holdings Nearest MX port to the south is AltamiraNearest MX port to the south is Altamira Principal Imports: steel products, iron orePrincipal Imports: steel products, iron ore Principal Exports: steel products, petroleum Principal Exports: steel products, petroleum

products, lubricants and grainproducts, lubricants and grain

With over 200 customers of the three short line railroads With over 200 customers of the three short line railroads does the description of the Port of Brownsville’s cargo does the description of the Port of Brownsville’s cargo highlights sound like it reflects the market?highlights sound like it reflects the market?


Connecting the (Geographic) DotsConnecting the (Geographic) Dots

Many organizations involved in this Many organizations involved in this example: port, businesses, railroads, state example: port, businesses, railroads, state and local governments, and all the and local governments, and all the economic development groups between economic development groups between Brownsville and Rio Grande City.Brownsville and Rio Grande City.

Many issues, physical capability the Many issues, physical capability the railroad’s, costs, track availabilityrailroad’s, costs, track availability


EDO’s Taking the InitiativeEDO’s Taking the Initiative

Reality:Reality: Responsibility to ‘join-up” various elements Responsibility to ‘join-up” various elements

resides nowhereresides nowhere

Little Washington role or resourcesLittle Washington role or resources DoT’s and DoC’sDoT’s and DoC’s Governments are out of cashGovernments are out of cash We could learn from success - successful We could learn from success - successful

places that have integrated infrastructure places that have integrated infrastructure planning and economic developmentplanning and economic development


Key Role for EDO’sKey Role for EDO’s

Action:Action:

EDO’s have the unique opportunity to be EDO’s have the unique opportunity to be regional “quarterback” between all the regional “quarterback” between all the players.players.

Texas has a unique market and setting that Texas has a unique market and setting that can prove to be a trailblazer in the UScan prove to be a trailblazer in the US

..

EDO OpportunityEDO Opportunity

Steps for EDO’s: Steps for EDO’s: 1.1. Understand global > local logistics Understand global > local logistics

patternspatterns2.2. Identify the logistic supply chainsIdentify the logistic supply chains3.3. Be strategic about key target segmentsBe strategic about key target segments4.4. Partner with transport-logistics industryPartner with transport-logistics industry5.5. Create necessary productsCreate necessary products

- property assets- property assets - logistics assets- logistics assets


Taking AdvantageTaking Advantage

What is neededWhat is needed

Money: Capital for infrastructure improvement and Money: Capital for infrastructure improvement and expansionexpansion

Stable security and immigration situation on the Stable security and immigration situation on the borderborder

Highway improvementsHighway improvements Cultural awareness and cooperation to improve Cultural awareness and cooperation to improve

border operationsborder operations Some attention to sustainability issuesSome attention to sustainability issues


About GLDPAbout GLDP

Investment advisory firm specializing in emerging multi-modal Investment advisory firm specializing in emerging multi-modal logistics hubs:logistics hubs: Maritime – Inland - AirMaritime – Inland - Air

Clients: public and private sectorClients: public and private sector

Public-private partnershipsPublic-private partnerships

Our emphasis is on delivery; advisory is means to an endOur emphasis is on delivery; advisory is means to an end

Senior professional expertise inSenior professional expertise in- Market analyticsMarket analytics - Supply Chain Management- Supply Chain Management- Economic developmentEconomic development - Infrastructure planning- Infrastructure planning- Business attraction Business attraction - Project delivery-finance- Project delivery-finance- Global logistics - Ports/terminals managementGlobal logistics - Ports/terminals management- Site SelectionSite Selection


Thank you. Thank you.

Global Logistics Development PartnersGlobal Logistics Development Partnersappreciates the opportunity to meet youappreciates the opportunity to meet you..

Adam Wasserman Adam Wasserman 623 341 0602623 341 [email protected]@gldpartners.com

Jonathan Red Jonathan Red 504 214 3081504 214 [email protected]@gldpartners.com


Texas - Global Logistics-Driven Investment

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