The Dynamics of the US Container Market
and Shifting Trade Patterns  Resulting
Implications

Martin Associates
941 Wheatland Ave. Suite 203
Lancaster, PA 17603
www.martinassoc.net

1

Growth in Containerized Cargo




2

Southern California Ports (PSW) Handle About 35% of
All Import Tonnage, but other Port Ranges are Growing





Source: US Maritime Administration
3

TEU's By US North Atlantic Ports




4

TEU's By South Atlantic Port



5

TEU's By Gulf Port



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6

TEU's By West Coast Port



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7

PNW Port TEU Throughput



8

Changes Have Occurred in the Existing
Logistics Patterns of Importers
Consolidation of imports via San Pedro Bay (Los Angeles
and Long Beach) Ports -- mid 1990's
Distribution center growth
Cross-dock operations
Rail investments in S. Cal to Midwest routings
But then.
9/11
West Coast Shutdown
Capacity Issues  Land and labor shortages
Rail and truck shortages
Search for alternatives
Shifting production centers
9
Economic crisis

All Water Routings are Growing



10

All Water Services are Growing

Panama Canal:
Current size limitations (-)
New, bigger canal (+)
Transit time issues (-)
Carriers can internalize rail revenue (+)
Suez Canal:
Accommodates larger vessels (+)
Better transit to SE Asia/India (+)
Political instability (-)
Transit time issue to Midwest (-)
Shifting Production to India/SE Asia (+)
New India-Med direct express services (+)
Transshipment operations in Med (+)

11

All Water Services are Growing
Historical distribution and logistics infrastructure
Domestic/import distribution centers in S. Cal do not
favor all water routings
Transit time issues for seasonal goods, particularly from
China, are a negative for all water services
Proximity to Southern Asia/India is a positive -Suez Canal
Growth in Indian Port Infrastructure
Significant growth in Distribution Centers in Gulf and
Atlantic Port Ranges
12

In Response, Distribution Center Activity is
Increasing at East Coast Ports, Driving Asian
Services
Georgia Ports Authority has attracted 19 distribution centers totaling 15
million SF including:
Advanced Auto Parts
Target (2.1 million sf)
IKEA (1.7 million sf)
Bass Pro Shops
Best Buy
Pirelli Tires NA
Fed Exp
Lowes
The Home Depot (1.4 million sf)
Wal*Mart (Savannah & Statesboro = 3.3 million sf)
Oneida -- Just Announced
There are 200 DC's within a 5 hour drive of Savannah
Port of New York/New Jersey Portfields Initiative:
PONY/NJ and New Jersey Economic Development Agency committed $1.8
million to identify 20 sites for distribution center development
Cooperation with developers to market and develop the sites
Focus on "near-port" locations
13

Distribution Center Activity is Increasing
at East and Gulf Coast Ports
Virginia Port Authority:
Wal*Mart Distribution center  1 million sf initially and expanded to
3 million sf
Target - 1.5 million sf and expanding
Cost Plus expanded to 1.1 million sf
Dollar Tree
QVC
Home Depot at Front Royal
Family Dollar at Front Royal
Jacksonville has experienced a significant growth in DC activity,
as well as the Orlando area


14

Significant Capacity is Coming on
Line at East and Gulf Coast Ports
Mobile  Choctaw Point  135 acres
Houston  Bayport  2.3 million TEU capacity
Jacksonville  MOL/TRAPAC (200 acres Dames Point)
and Hanjin (200 acres)
Corpus Christi  La Quinta Terminal  about 300 acres
Charleston:
286 acre, 3 berth development at Charleston Naval
Base Complex
Jasper County Property  Joint GPA/SCSPA
development 1,800+ acres
Wilmington, NC  600 acre South Port Complex

15

Significant Capacity is Coming on
Line at East and Gulf Coast Ports
Norfolk:
291 acre APM Terminal at Portsmouth
Craney Island  600 acres
New Orleans  Napoleon Avenue Expansion
250,000 TEU's
Baltimore  400 acres long-term development
of Sparrows Point
Philadelphia  Southport development (200
acres)
Wilmington, DE - 200 acre terminal potential
16

Impact of Development of All-water Service





17

Imported Asian Container Tonnage-
US North Atlantic Port Range



Source: US Maritime Administration
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Imported Asian Container Tonnage 
South Atlantic Port Range



Source: US Maritime Administration
19

Asian Containerized Tonnage is Driving
the Growth at the Port of Houston




Source: US Maritime Administration, Foreign Trade Statistics
20

China Has Been Responsible for Nearly 40% of Imported Containerized
Tonnage






US Maritime Administration
2006 data reflects new data base by MARAD                                      21

However, Asian Supply Sources are Shifting





22

Implications for Atlantic and Gulf
Coast Ports
Throughput growth likely to continue:
Added and planned Port capacity
Bigger Panama Canal
Increased use of Suez Canal
Growth in India and South Asia
Development of transshipment centers in
Med to relay cargo from SE Asia and India
to North America
Growth in transshipment centers in Panama
23

Implications for the Atlantic and
Gulf Coast
Carriers are reducing intermodal services from the West Coast
Increase in intermodal rates from West Coast to East Coast
Control of equipment
Steamship lines can internalize revenue previously shared with
railroads
Reduce cost of backhauls
With Addition of Direct Services, transit time differentials are
narrowing to serve Atlantic Coast ports:
18-21 days via All Water Services
18-22 days via West Coast Ports
And transit time differentials are narrowing to serve Midwestern
points:
14-18 days via West Coast Ports
21-26 days via All Water Services

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Existing Service Total Landed Cost Analysis  Least Cost
Entry Ports for Hong Kong to US Consumption Points



Cost Advantage
Houston
LA/LB& Houston
Parity

New York
Seattle/Tacoma

LA/LB
25
Savannah
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Existing Service Total Landed Cost Analysis  Least Cost Entry Ports for
Singapore to US Consumption Points
Seattle/Tacoma






Cost Advantage
New York

Charleston
Seattle/Tacoma

LA/LB
26
Savannah
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Existing Service Total Landed Cost Analysis  Least Cost Entry Ports for
Nhava Sheva-India to US Consumption Points
Seattle/Tacoma





Cost Advantage
Parity <$30 dif.

Norfolk

Charleston
Savannah & Houston
Houston

New York
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Savannah
27

With The Expansion of the Canal, Larger Vessels and Increased Direct All
Water Service to the Atlantic and Gulf, The Midwestern US Becomes the
Battleground

PNW




LA/LB
New York


Savannah

LA/LB


LA/LB

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Source: Rail Costing Analysis  Horizon Mgmt  Acierto-LLC
Existing Intermodal Rates

Implications for West Coast
Ports
Ports with a high degree of discretionary cargo will be at risk
Shifting supply sources
Expansion of Canal
Deployment of direct services with large vessels to Gulf and
Atlantic
Improved productivity and labor dependability are necessary
Increases in port charges and infrastructure fees, as well as
regulatory issues could have a negative impact on market share
Rail pricing will become critical


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US West Coast Ports are Experiencing a
Greater Decline




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In Order to Handle the Anticipated Growth at
East Coast Ports, Terminal Densification will Be
Required
PORT      2008 TEUs ACREAGE TEU/ACRE
MONTREAL       1,473,914   185   7,967
HALIFAX           387,347    162   2,391
BOSTON         211,085   101   2,090
NEW YORK/NEW JERSEY 5,265,059   1,261   4,175
PHILADELPHIA        255,994    228   1,123
BALTIMORE        612,877    354   1,731
NORFOLK        2,083,278   619   3,366
WILMINGTON, NC     196,040    100   1,960
CHARLESTON       1,635,537    395   4,141
SAVANNAH       2,616,185  1,200  2,180
JACKSONVILLE       718,467    215   3,342
PORT EVERGLADES     985,095    270   3,649
MIAMI           847,809    259   3,273
TOTAL EAST COAST   17,288,687   5,349   3,232
BASED ON GROSS ACREAGE
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Terminal Capacity Implications
Currently San Pedro Bay Ports are averaging
5,500 TEU's acre/year
This average has increased recently due to:
Reduced dwell times  through increased demurrage rates
PierPass - increased number of shifts ( two, 8 hour shifts
plus extended gate hours)
Studies indicate that terminal density can
increase to 8,000 TEU's/ acre and eventually to
11,000 TEU's /acre without major changes in
operating structures and without terminal
automation

32

East Coast Port Constraints
Assuming 5,500 and 8,000 TEU/Acre Densification




Most likely the terminals will achieve a 8,000 TEU per acre throughput in future
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Implications on Infrastructure
Funding
Deepwater ports have lost funding for
system preservation projects:
After 9/11 - security investments competing
with system preservation investments
Downturn of trade drastically reducing port
revenues
Economic crisis reducing state/municipal
public funding and potentially private sector
participation
34

More Infrastructure Funding
Needed
Opening of expanded Panama Canal will allow 7,000 TEU plus
ships to transit
Only a handful of US East and Gulf Coast ports can handle next
generation container ships, and growing all water services to East
Coast/Gulf Coast requires channel deepening and terminal
infrastructure
Without deeper channels and maintenance of current channels,
economies of larger ships won't be realized
Maintenance dredging and deepening projects are clogged in
USACE bureaucracy, combined with limited funding of projects

35

Public Port Investments



Source: US Maritime Administration
36

Ports Area Responding in Terms of
Changes in Leases and Pricing
Movement toward compensatory pricing
Movement from operating port to landlord
port:
Maryland Port Administration
Diamond State Port Corporation
Virginia Port Authority
North Carolina State Ports Authority
Port of Lake Charles
South Carolina State Port Authority
Port of Portland, OR
37

Trends in Seaport Financing/Leasing
Increased use of municipal bonds on behalf of private entity where
private party is responsible for debt service:
Jacksonville
Baltimore
Galveston
Mobile  Choctaw Point
Public-private partnerships and the increase in concessions:
Lump sum up front payments - Traditional concession i.e., Maher
Terminals in New York
Combination of up front payments and annual payments and MAGS,
and identified private party infrastructure investment --
Ports America  Oakland
MPA Current RFQ for Seagirt
Traditional leases with private party responsible for debt service on a
municipal bond

38

2005 - 2007 Was the Peak of Public Private Partnerships
July, 2007  Goldman Sachs acquires minority stake in Carrix -- SSA:
Multiple not known
March 2007 - AIG Investment Group acquires MTC terminals - $800 million:
Multiple not known
March 2007  RREEF purchases Maher Terminals:
$2.1 billion (445 acre terminal in NYC and the Fairview Terminal in Prince
Rupert, BC
(34.2 multiplier against enterprise value to last 12 months of earnings before
interest, taxes, depreciation, and amortization)
February 2007 Morgan Stanley purchases Montreal Gateway Terminals -- $480
million:
80% share of 2 terminals in Montreal  1.1 million TEUs
Hapag-Lloyd has balance
December 2006  AIG purchases P&O Ports North America - $1.0 billion plus
December 2006  Ontario Teachers Pension Fund purchases OOIL Terminals:
2 in NYC
2 In Vancouver, BC
21.9 multiple
November 2006 - RREEF purchases Peel Ports:
16.0 multiplier                                        39

2005 -2007 Was the Peak of Public Private Partnerships
November 2006  Macquarie purchases 72 acre Halterm terminal in Halifax:
17.0 multiplier
September 2006  Macquarie purchases 40% share of Hanjin's terminals in
Oakland, Long Beach and Seattle:
Multiple not known
June 2006 - Admiral Consortium purchases Associated British Ports that handle
25% of the UK cargo:
$6.4 billion
16.2 multiplier
April 2006  PSA purchases Hutchinson Port Holdings:
$7.5 billion
14.0 multiplier
January 2006  DP World purchases P&O Ports:
$8.9 billion
15.2 multiplier
December 2005 - Babcock & Brown purchases PD Ports:
$1.1 billion
13.2 multiplier

40

Recently, There Has Been Increased
Concession Activity
2008 - Port of Portland Issues RFP for Terminal 6
2009 - Ports America enters into Port of Oakland Concession
2009 - CenterPoint offer for the Virginia Port Authority Terminals
Port of Baltimore issuing RFQ for Seagirt Marine Terminal
Concession
Philadelphia Regional Port Authority issues RFP for Southport
Concession
RFQ likely from South Jersey Port Corporation  Paulsboro property
RFQ likely from Wilmington, NC for Southport Property
RFQ likely for Jasper County SC site

41

But the Concession Market
Remains Uncertain
Port of Portland pulls back RFP
Philadelphia Southport RFP - Postpones
Corpus Christi pulls back RFP process
for La Quinta
MPA received two responses
Additional bids for VPA

42

The Ports of Seattle and Tacoma Face Significant
Competitive Challenges
Increased deployment of all- water services
Expanded Panama Canal
Narrowing of transit time differentials - intermodal West Coast
compared to all water services
Reduced intermodal services via West Coast ports - equipment control
Growth in Price Rupert -- 124% increase in first half or 2009 vs. same
period in 2008
Escalating intermodal rail rates
Shifting Asian production centers  India and Southeast Asia
Perceived labor-management issues at West Coast ports
Population centers proximity to Atlantic and Gulf Coast ports
Capacity availability at Gulf and Atlantic Coast ports
Increased investment in rail infrastructure to serve Atlantic Coast ports:
Heartland Corridor - NS
National Gateway - CSX
43

Despite the Competitive Challenges, The Ports of
Seattle and Tacoma Remain Major Contributors
to the PNW Economy
About 60,000 total direct, induced and indirect
jobs
More than $5 billion of total personal wages and
salaries and regional consumption expenditures
Nearly $6 billion of direct revenue to regional
businesses providing port and maritime services
An estimated $850 million of regional purchases by
businesses
About $500 million of state and local taxes
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