1. Opportunity Panama –
For who?
Who might
the potential winners and losers be
19 April 2010 Opportunity Panama

2. Summary
• West versus East’: why, how & when?
• Load centres: where?
• Role Productivity will play: the great
differentiator.
• Port property: enhancing the port’s reach,
intermodal and other competitive advantages.
• The Caribbean & the ‘Cuba Factor’: ready,
steady, go?
19 April 2010 Opportunity Panama

3. Now for something totally
different:
What caused the political
union of Great Britain?
• England?
• Scotland?
• Panama?
19 April 2010 Opportunity Panama

4. Scotland 1699?
New Caledonia Hebrides?
19 April 2010 Opportunity Panama

5. Never underestimate the Scots
• 1699 Scotland bankrupt - Darien Scheme last chance for
independence
• Darien pass (today Panama Canal) their ace to Asian
routes
• Scotland bets future on Darien Scheme, turns into
‘Darien Fiasco’
• England offers to pay off debt if Scotland unites; she
agrees as there is no hope left for independence.
• Scotland’s Renaissance then starts by the Scots
deciding to ‘out English the English’
• Scots responsible for UK’s industrial and economic
growth and become major force in government.
19 April 2010 Opportunity Panama

6. Why is PC Expansion
Important?
• Dramatically increase the flow of cargo via larger
ships: to 12,500 TEU
• Over water is far cheaper than over land
• But, this does not mean that these class ships
will immediately come to the East coast.
• Nevertheless, average size will significantly
increase to the 6,000 – 8,000 TEU in relatively
near term
19 April 2010 Opportunity Panama

7. How soon and large the shift?
WEST VERSUS EAST
19 April 2010 Opportunity Panama

8. West versus East
• Shift started well before the Panama
Canal (PC) expansion
– Shift in mfg base in Asia & increased Suez
use
– Drewry: ‘up to 25% over ten years’
• West coast won’t take this lying down
– Ports and RR’s to price aggressively
– Crossing the PC will not come cheap
• Four more years to prepare
19 April 2010 Opportunity Panama

9. Where will they be?
LOAD CENTRES ON THE
COASTS
19 April 2010 Opportunity Panama

10. East & West Coast
Load Centres
• Will require depth, bridge clearance and
terminal capacity
• West: Los Angeles/Long Beach &
Seattle/Tacoma
• East: the race is on!
19 April 2010 Opportunity Panama

11. North Atlantic
• Ports of New York & New Jersey: but they
have an air draft problem at the Bayonne
Bridge (need at least 180 feet of height
and currently have approximately 156); but
there will be a solution.
• Hampton Roads is ready to go now.
19 April 2010 Opportunity Panama

12. The race is for third place in
the South Atlantic
• Larger ships will have two to three calls,
most probably three
• Will need deep reach into hinterlands ;
therefore significant intermodal capability
19 April 2010 Opportunity Panama

13. South Atlantic Contenders
Comparative Costs to Operate a 6,000 & 8,000 TEU Container Ship
from Ocean Buoy to General Port Area and Return
Port Hampton Roads Charleston Savannah Jacksonville Mobile
Distance from ocean
buoy 18.0 15.0 32.3 21.0 28.0
Approximate depth of
channel
50’ 45’ 42’ 41’ 40’
NM from ocean buoy ‐
return
36.0 30.0 64.6 42.0 56.0
Ship operating hours
required 3.60 3.00 6.46 4.20 5.60
Hinterland(?);
Intermodal but being Channel depth and width No land, channel depth
Challenges None channel depth;
developed ; steaming distance and width
steaming distance
Terminal capacity? Yes Yes Yes Yes Yes
19 April 2010 Opportunity Panama

14. The new role it will play
PRODUCTIVITY
19 April 2010 Opportunity Panama

15. The new differentiator
• US ports are less productive than
Asian/European ie, 25 - 30 moves per
hours (containers) versus 45 (therefore
need more cranes or faster productivity
here)
• Port performance, handling speed and
reliability will be critical to gain market
share
• Opportunity for second tier ports
19 April 2010 Opportunity Panama

16. From an administrative to a strategic asset
PORT PROPERTY
19 April 2010 Opportunity Panama

17. Port property –
the new strategic asset
• 8,000 TEU ship requires 100 acres to
keep container flow inbound smooth; most
large ports are land constrained.
• Throughput per acre is key to making
customers happy and money eg, in US
about 4,000 – 5,000 TEU/acre yet in
Europe and Asia 10,000 TEU/acre and
higher is not unusual
19 April 2010 Opportunity Panama

18. Port property – intermodal
and value added services
• Intermodal capabilities are increasingly critical
for viability of port transport nodes in order
access hinterlands required by larger ships
• As transport costs increase (fuel, manning, etc –
about US$ 50,000 to $60,000/day for an 8,000
TEU ship), local, value added service become
increasingly attractive to shippers – requires
land and facilities
19 April 2010 Opportunity Panama

19. Ready, steady, go?
THE CARIBBEAN &
THE ‘CUBA FACTOR’
19 April 2010 Opportunity Panama

20. Caribbean transhipnment
• As East coast ports grapple with capacity
and capability issues , transhipment
becomes a viable alternative to feed the
Gulf and Eastern seaboard ports
• Transhipment ports are in Panama,
Freeport, Puerto Rico and Jamaica
• Cuba is the wild card going forward
19 April 2010 Opportunity Panama

21. Cuba’s Ports
19 April 2010 Opportunity Panama

22. Cuba’s Ports
First tier: Second tier:
• Habana • Mariel
• Cienfuegos • Matanzas
• Santiago de Cuba • Isabela de Sagua
• Antilla • Nuevitas
• Felton
• Manzanillo
• Nueva Gerona
19 April 2010 Opportunity Panama

23. Cuba – strategic advantages
• Location: strategically located - no deviation
from major trade routes
• Cost: major cost advantage compared to
Jamaica and Panama (PR barred by Jones act)
• Hinterland: largest Caribbean hinterland – 13M,
who haven’t imported anything in the last 45
years
• Depth: natural ports with deep water; one
greenfield site with purportedly 200m.
19 April 2010 Opportunity Panama

24. Cuba - Challenges
• Infrastructure: similar to a 1970’s Third
World country eg, Habana has two key
cranes, only one operating until it was
repaired (1996)
• BUT: this lack of infrastructure may turn
out to be an advantage; think Germany
and Japan after WWII
19 April 2010 Opportunity Panama

25. Cuba: transhipment port to Gulf ports?
Control Depth
Less than 6 feet
6 to 20 feet
20 to 45 feet
45 to 75 feet
More than 75 feet
19 April 2010 Opportunity Panama

26. What might happen from a trade
standpoint?
• Puerto Rico could be an example ie,
transhipment from there to Jacksonville
and Miami during the last several
decades; but this is now changing as well.
• Feeder transhipment node to the Gulf
ports?
• Will American ports allow anything
transhipped from Cuba though?
19 April 2010 Opportunity Panama

27. But, there is a possible
alternative role
• Major strategic issue facing major lines:
How to service secondary trades? An
opening for Cuba?
• Transport must be through a node;
currently it is Panama (balboa and
Cristobal). Could it become Cuba in the
future?
19 April 2010 Opportunity Panama

28. But what about the changes in the
industry taking place?
• Consolidation of ship size from 4.5k TEU
to 8.5k TEU due to massive scrapping
taking place.
• Increase to larger ships by lines – 10k
TEU to 12.k TEU, requiring 2 to 3 stops &
the expansion of East Coast US ports,
limiting transhipment?
• Less moves the better!
19 April 2010 Opportunity Panama

29. When and by how much?
• East coast port volumes may not warrant
larger than 8,000 TEU ships for some time
• Size range to US East coast will therefore
be from 6,000 to 8,000 TEU
• New load centre ports will open the door
for specialist second tier ports which might
be able to deliver faster, better and
cheaper service
19 April 2010 Opportunity Panama

30. When and by how much?
• Trade form Latin America and Europe
should grow, in many cases where 8,000
TEU +/- sized ships will not e in service for
some time to come, if ever
• Secondary ports (eg, Port Manatee) might
be able to offer direct service with ‘value
added capabilities and hinterland access
for expedited, more direct serivce.
19 April 2010 Opportunity Panama

31. Conclusion
Panama and opportunity is
knocking on your door!
19 April 2010 Opportunity Panama

32. Thank you
Helping you navigate
the world of port properties
Aegir Port Property Advisers
+1 305 423 7711
+1 305 423 7712 F
www.aegirports.com
info@aegirports.com
19 April 2010 Opportunity Panama