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Panel I: North American Economic Trade Outlook

for the Port Industry

Facilities Engineering Seminar

November 8 2011, New Orleans Robert West

2

Main Topics

Global Economic and Trade Outlook

Economic Perspectives in Latin America

Implications for North America

Conclusions

3

(World GDP, Percent change)

The World Economy is still recovering

from the nightmare of 2008-09

Source: IHS Global Insight

-9

-6

-3

0

3

6

9

2000 2002 2004 2006 2008 2010 2012 2014

-10

-8

-6

-4

-2

0

2

4

6

8

10

Real GDP Industrial Production

Cargo trade demand reflects more volatile industrial production

Indust. Production, Percent change

Nightmare

4

Source: IHS Global Insight & Halcrow

Source: Global Insight, Worley Parsons

Real GDP (% change)

The emerging markets have helped to keep the world

from falling into an even deeper recession

and are leading the recovery.

-4

-2

0

2

4

6

8

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

World Advanced Countries Emerging Countries

Gap between

emerging and

advanced countries

will shrink slightly.

US > Europe, Japan

5

-9

-6

-3

0

3

6

9

NAFTA Other

Americas

Western

Europe

Emerging

Europe

Mideast-

N. Africa

Sub-

Saharan

Africa

Japan Other

Asia-

Pacific

2009 2010 2011 2012 2013-20

(Real GDP, percent change)

GDP growth rate differences

affect the pace of

trade growth and volumes by trade route

Source: IHS Global Insight & WorleyParsons

Geography of production / consumption is changing as emerging markets

grow 6% on average over the next decade vs. 2.3% for advanced countries.

World’s

Largest

Museum

6

World trade depends on the

strength of the global economy

The World Economic Outlook - Continued Slow Recovery

The U.S. economy has gained some strength - still bumpy – but will grow faster than Europe or Japan in 2011

Emerging markets will slow a little, but still grow much more rapidly than the developed countries

Commodity prices are increasing – inflation will not be a problem in developed economies (there is still a lot of slack), but are a growing concern in the emerging market countries

Interest rates will remain low in the developed countries for a while longer, but keep rising in the big developing countries – demand pull (is Brazil an exception?)

7

15

20

25

30

35

40

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Pe

rce

tn S

ha

re

(World imports, percent of GDP)

World trade’s share of the economy

grows again after a temporary decline

Source: IHS Global Insight

Globalization trend is long-term and has not reversed or stopped

No change

This was NOT

a reversal of

globalization

8

80,000,000

90,000,000

100,000,000

110,000,000

120,000,000

130,000,000

140,000,000

150,000,000

160,000,000

2008 2009 2010 2011 2012 2013 2014 2015

World TEUs will soon exceed the 2008 numbers.

However, the years of double digit growth

(’03, ’04, ’06) are not to be seen again.

The

Nightmare

8.8%

FULL TEUs

2008-10 0.0%

CAGR

0.0%

2010-15 6.6%

2015-30 5.0%

9

Ocean Container Trade Outlook

Asia – North America container TEU volume growth in

2011 of 8.8% eastbound and 9.1 % westbound – Drewry

(Feb 2011). Now, eastbound looks more like 0-2%.

With mew, big ships going into Asia-Europe trades and

displaced ships moving onto other routes such as N-S

trade, there could be reduced load factors, pushing for

more containerization of additional trades.

This supply pressure in the containership sector will

continue since the orderbook of new containerships for

delivery still represents over 25% of world containership

capacity already operating.

10

Main Topics

Global Economic and Trade Outlook

Economic Perspectives in Latin America

Implications for North America

Conclusions

11

Fastest-Growing South American Importers from USA

-7

-5-3

-1

1

35

7

9

Bra

zil

Arg

entin

a

Nic

arag

ua

Ven

ezuel

a

Chile

Colo

mbi

aPer

u

Pan

ama

2009 2010 2011

(Real GDP, percent change)

Source: Data and tables from IHS Global Insight, CIA Factbook, OECD, Moody’s, Goldmand Sachs

In Latin America,

most countries are expected to have

solid economic growth in 2011.

12

After the BRICs, it’s the CIVETS

Moderate size, dynamic governments open

to foreign investment, looking for free trade

agreements, building on an “export model”

Colombia

Indonesia

Vietnam

Egypt

Turkey

South Africa

13

Colombia - China has the money

China has increased

world trade volumes

Now China intends to change the logistics, too

Lower import costs

Improved logisitcs

China

Colombia

$7.6 billion

A new city near Cartagena

Chinese Development Bank

Operator – China Railway Group

Length – 221km (shorter than

Nica)

A new railway in Colombia? Santos got what he wanted - FTA

14

There will have to be more inland infrastructure

to connect the mines with the railway.

Puerto Sinu

15

Short Sea Shipping in MesoAmerica

15

US

-PA

NA

MA

Countries

Mexico (south)

Belize

Guatemala

El Salvador

Honduras

Nicaragua

Costa Rica

Panama

Colombia

Dominican Republic

16

WorleyParsons is a subcontractor to INECON (Santiago, Chile) to study:

The demand for “transporte maritimo de corta distancia”

Existing port infrastructure in 45 ports in the region

The best new services: routes and ships

Streamlining the procedures: customs, port tariffs, etc. among the 10 countries

17

P. CABELLO P. of SPAIN

RIO HAINA

SAN JUAN

CAUCEDO

Caribbean Transshipment Triangle

FREEPORT

COLON/MIT

KINGSTON

CARTAGENA

Transshipment in the Caribbean

More growth ahead

17

At capacity MOIN

18

Moín – Limon, Costa Rica

$992 milllion by APM Terminals

90% domestic cargo only – 10%

transshipment

Concession signed in August, 2011

It’s all about productivity

An interoceanic

railway is not part of

the deal.

19

$785 $808

$964$1,017

$1,161

$2,342

$0

$500

$1,000

$1,500

$2,000

$2,500

All Water after

PC Expansion

All Water

(Current)

T/S via Balboa T/S via MIT T/S via

Caucedo

Landbridge LA

to NY

Cost per TEU: China to NY

For Asia-USEC, the All-Water route is still the

cheapest. Even with transshipment

the All-Water cost is still comparatively cheap.

After the expansion, the

cost per TEU will be $123

lower than the current one-

way cost

20

For a typical Asia-USEC voyage,

shifting to an 8000 TEU vessel

expands the market reach of the USEC ports.

46%*

4000 TEU ship 8000 TEU ship

Assumptions

$400/MT bunker

Canal tolls based on new 2011 rates

Ship charter rates, Dec 2010

Inland move by rail

63%*

*Share of the US population reachable by rail

Intermodal Advantage Canal Advantage

2015 NOW

25

0 -

0 -

-25

0 -

-60

0 -

-75

0 -

-10

00

-

-12

50

-

21

Main Topics

Global Economic and Trade Outlook

Economic Perspectives in Latin America

Implications for North America

Conclusions

22

Economic outlook for U.S.

US Unemployment Rate

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

%

Nightmare

The future:

• flat

• horizontal

• unchanged

• neither worse

nor better

23

Unemployment is not a problem.

Unemployment is a symptom Consumer fear

Investment fear

Government gridlock

Main street and Wall Street: uncertainty

Weak savings

24

CONCLUSIONS

North American import growth will be sluggish this year, and

perhaps next

Stronger trade growth is with the emerging markets

After 2012, things should be more “normal”, heading into the

Canal expansion opening (October 2014)

Transshipment will grow, as a necessity

25

Success!!