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Walter Kemmsies Focus 2030 DRAFT The Economic Outlook for Facilities Projects and Investments AAPA March 2020 Walter Kemmsies
Walter Kemmsies
Focus 2030DRAFT
The Economic Outlook for Facilities Projects and Investments
AAPA
March 2020
Walter Kemmsies
Tailwinds with a bit of turbulence
• Recent economic growth has been anaemic due to impacts of trade agreement negotiation strategies and
other factors creating an uncertain economic environment, compounded by the development of the
Coronavirus pandemic
• Economic and trade (export) growth could pick up significantly in the back half of 2020 due to less uncertainty
• Volatility of the transition period is part of the process of adjusting to new policies
0%
2%
4%
6%
8%
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12%
14%
16%
18%
20%
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Recession Period Fed Funds Effective Rate
11
1 1
1
1
11
1
2
22
2
2
Mid-cycle pause or recession?
Federal Funds Rate and Business Cycles
DRAFT
US long term economic trends
REAL GDP GROWTH AND SUM OF DRIVERS’ GROWTH
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
194
81
950
195
21
954
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61
958
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01
962
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41
966
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81
970
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974
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61
978
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01
982
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41
986
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81
990
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21
994
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61
998
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02
002
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42
006
200
82
010
201
22
014
201
62
018
Recession Employment + Productivity RGDP
DRAFT
Labor force participation is not yet back at historical peak levelsDRAFT
US working age population growth
Working Age Population Growth: Historical and Forecast
DRAFT
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
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01
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25
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28
Coronavirus impacts on Chinese port activity
Source: Clarkson’s
Source: Sea-Intelligence
Survey of Supply Chain Executives – January 2020
HAS YOUR COMPANY CHANGED SOURCING TO ALTERNATIVE LOCATIONS FROM CHINA INCLUDING REPATRIATION OF OPERATIONS TO THE US?
0%
10%
20%
30%
40%
50%
60%
70%
Yes NO
IF TRADE WITH CHINA WERE STABILIZED OVER A LONGER PERIOD OF TIME, WOULD YOU STILL DIVERSIFY YOUR SOURCING?
0%
10%
20%
30%
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60%
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90%
Yes NO
IF YOU HAVE MANUFACTURERS SUPPLYING FROM CHINA, HAVE THEY MOVED TO ALTERNATIVE ORIGINS OF SUPPLY?
0%
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20%
30%
40%
50%
60%
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80%
Yes NO
IF YOU ANSWERED YES TO ANY OF THE 3 EARLIER QUESTIONS, WHAT ALTERNATIVE SOURCING LOCATIONS HAVE YOU CHOSEN?
0%
5%
10%
15%
20%
25%
30%
Source: Supply Chain Leadership Association, January Survey
China’s share of US containerized volumes peaked in 2018
US CONTAINERIZED IMPORT VOLUMES: 2018 AND 2019
DRAFT
Country 2018 Share 2019 Share Share Change
China 37% 33% -4.5%
Europe 19% 20% 0.5%
India 4% 5% 0.6%
Brazil 3% 3% 0.0%
Vietnam 3% 4% 1.0%
Korea, South 3% 3% 0.2%
Thailand 3% 3% 0.3%
Taiwan 2% 3% 0.2%
Turkey 2% 2% 0.2%
Colombia 1% 2% 0.3%
Malaysia 1% 2% 0.4%
Mexico 1% 1% 0.1%
Guatemala 1% 1% 0.3%
Canada 1% 1% 0.2%
World Total
Import
Growth
World Total
Export
Growth
World
Containerized
Import Growth
World
Containerized
Export Growth
2017 1.4% 15.3% 4.6% 9.5%
2018 -2.7% 11.8% 4.8% 8.5%
2019 -6.3% 0.1% 1.3% -0.8%
China Total
Import
Growth
China Total
Export
Growth
China
Containerized
Import Growth
China
Containerized
Export Growth
2017 5.9% 8.6% 6.4% 5.9%
2018 6.5% -36.4% 7.8% -16.4%
2019 -12.2% -13.9% -10.4% -20.0%
China Total
Import Share
China Total
Export Share
China
Containerized
Import Share
China
Containerized
Export Share
2017 10.0% 14.8% 35.9% 24.5%
2018 10.9% 8.4% 37.0% 18.9%
2019 10.2% 7.2% 32.7% 15.3%
US East Coast ports have better global connectivity
Source: IMF, JLL PAGI
COUNTRY SHARE OF US CONTAINERIZED VOLUMES (METRIC TONS)
East Coast ports and railroads are more likely to gain from a shift of import sourcing away from China
PORT 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Global Rank Out of 960
New York/New Jersey 36.1 35.8 33.4 36.0 39.2 39.8 41.6 40.8 40.5 41.4 40.7 39.1 48.5 49.9 36
Savannah 33.2 32.3 31.8 32.5 33.5 39.1 39.7 39.6 40.2 39.7 39.4 45.3 48.6 49.8 37
Charleston 28.1 27.2 26.3 23.3 29.0 29.9 31.2 30.7 31.4 32.5 32.5 38.3 42.2 43.1 61
Oakland 34.6 33.5 34.6 33.8 33.6 38.5 38.4 39.5 41.7 37.9 44.2 44.5 44.7 43.0 63
Norfolk 33.1 31.9 29.3 29.2 31.2 32.8 34.4 33.5 34.1 35.4 35.3 41.0 41.3 42.6 64
Los Angeles 33.3 33.5 30.0 31.6 30.2 31.2 34.2 35.6 38.7 41.5 41.6 42.4 42.3 42.0 66
Houston 35.4 34.7 33.6 33.0 32.8 37.5 36.8 36.2 37.1 37.1 36.6 35.8 36.3 39.6 71
Long Beach 31.6 28.9 31.1 28.1 27.2 33.4 32.0 32.0 33.2 33.8 36.4 37.9 35.7 37.1 79
Philadelphia 15.9 13.7 14.1 13.7 14.7 19.5 15.5 16.0 18.0 18.7 20.6 28.5 31.5 32.5 102
New Orleans 26.0 26.2 23.6 21.0 24.2 27.0 27.4 28.0 27.9 27.9 27.7 30.1 31.6 32.1 104
Seattle 24.2 25.3 24.4 24.9 26.2 27.9 26.3 25.0 27.0 24.6 27.3 29.5 34.4 30.5 115
Jacksonville 19.7 19.1 19.5 17.7 20.4 22.9 24.6 24.2 25.7 23.6 23.6 28.3 25.4 28.5 124
Miami 23.4 22.4 19.8 20.2 20.4 21.9 21.8 24.1 24.8 27.7 27.8 27.3 30.8 27.5 130
Baltimore 19.2 18.1 18.5 18.9 26.3 26.2 27.1 26.6 27.0 28.5 27.9 26.2 27.5 27.5 132
Port Everglades 25.2 24.8 24.2 23.2 24.6 26.3 24.8 24.4 25.9 29.6 24.9 25.9 24.0 26.8 140
Wilmington (NC) 10.4 10.9 12.1 11.3 10.9 12.6 10.9 11.4 12.6 12.8 13.7 23.5 23.9 26.2 142
Tacoma 19.6 21.7 22.1 23.8 18.2 18.0 21.3 24.6 25.8 25.3 27.1 19.8 22.7 24.4 158
Boston 10.2 10.1 9.6 10.8 11.7 17.0 14.7 13.3 14.1 15.4 15.8 21.0 20.4 21.7 177
Mobile 7.9 7.8 8.7 14.2 12.3 16.8 15.0 17.8 17.3 17.4 18.4 20.7 20.0 21.3 180
Tampa 4.0 8.3 7.2 7.4 8.1 5.9 5.3 8.5 9.1 7.6 7.7 8.0 9.0 19.8 187
Color Key = East Coast West Coast Gulf Coast
DRAFT
Recent imported container trendsDRAFT
2019 COMPARED TO 2018 FOR SELECT PORTS
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
PrinceRupert+19%
Vancouver-2.4%
Sea-Tac-3.1%
Oakland+1.2%
LosAngeles -
1.4%
Long Beach-11.6%
New York+4.1%
Norfolk+3.8%
Charleston+6.9%
Savannah+7.4%
Houston+6.0%
CO
NTA
INER
S IN
TEU
s
2018 2019
Imported container volumes for the East Coast ports shown here grew 5.3% while West Coast imported
volumes declined 3.8%
World trade created the largest global middle class ever
Source: WTO, OECD, Census Bureau, Kemmsies/JLL
World Real GDP and Trade Volume Indexes
1950-2018E
World Population and
OECD Global Middle Class Estimates
1.8
3.0
3.8
4.6
5.4
6.9
7.3
7.6
8.08.3
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Bill
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Global Middle Class World Population
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dex
GDP Total Agriculture Fuels & Mining Manufactured
Relative to GDP Growth
GDP 3.7% 1.0
Manufactured Goods 7.0% 1.9
Fuels and Mining Products 3.8% 1.0
Agricultural Goods 3.5% 1.0
Total Trade 5.8% 1.6
1950 - 2015 CAGR
China Growth
Asian “Tigers”
Japan, Brazil Growth
Drivers of trade: unequal distribution of resources, trade agreements/tariffs, infrastructure, communication/information technology
Opening the world markets facilitated more manufacturing jobs in developing countries, allowing for the creation of the global middle class
DRAFT
More trade means greater deployment of larger vessels is feasible
EVOLUTION OF CONTAINERSHIP SIZE
Race to build
larger ships
• Few innovations
in industry apart
from building
larger ships
Bigger ships, congestion, trains and industrial real estate
14,000 TEU Vessel 95% Full = 14,778 lifts to unload and load
77% moved by truck = 11,379 one-way truck trips = 131 miles of trucks end-to-end
23% moved by rail = 10 unit trains = 20 miles of trains end-to-end
768K (import and export) TEUs per year requires 20M to 60M sf of DC space
Average Intermodal Shares of Various Ports (2018)
Los Angeles / Long Beach 40% | New York 25% | Savannah 18% | Norfolk 35%
Inland hubs are becoming more numerous in the US
Source: JLL Research
Everyone needs an intermodal strategy
DRAFT
E-commerce Trends
RETAIL SALES (EXCLUDING GASOLINE AND AUTOS) TOTAL AND VIA E-COMMERCE AND E-COMMERCE
SHARE
This chart shows retail sales excluding gasoline and automobiles from 1999 to 2019 Q3
Consensus view is that the e-commerce share increases from ~10% in 2019 to 20% by 2025
DRAFT
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Shar
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Forecast Period Ecommerce Share (right axis) Total Ecommerce
Private vehicle sales and international trade trends
With slow growing population and lower GDP growth, as well as a shift towards electric vehicles that last longer
than internal combustion engine vehicles, it is more likely that US vehicle sales will decline from the current 16 to 17
million units per year level. The shift to electric vehicles is expected to slowly replace the current US vehicle fleet
DRAFT
US AUTO AND LIGHT TRUCK SALES: 2000 - 2019
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
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Domestic Total Foreign Auto Unit Exports
Summing up
• Recent economic growth has been anaemic – a negative GDP growth quarter or two could happen in 2020
• Economic and trade (export) growth likely to pick up significantly in the back half of 2020
• Expect a volatile adjustment to new policies
