1 Future Global Trade Trends - Risks & Opportunities Pulse of the Ports: Peak Season Forecast March 21, 2013 June 2012 Dr. Walter Kemmsies Chief Economist
Summary Higher economic growth in 2013, possible recession in 2015 Pent-up demand could drive GDP growth much higher in 2013. Fed could reverse its extraordinary actions perhaps later this year. Outlook is still policy-driven. eg., fiscal cliff overhang. Peak season 2013 likely to be 5% higher than in 2012 Range of outcomes is very wide, reflecting macroeconomic uncertainty Other sustainable trends such as accommodating the growing global middle class are impacting freight movement Major shifts in equipment repositioning patterns Imports to shift from North Asia to South Asia and also Mexico Transportation shifts from oil fuels to natural gas
Consumer Spending Is Past The Worst Point 300 US Retail, Autos and Home Sales Sales Indexed to 100 in January 1992 250 200 150 100 50 Cash for Clunkers Value Volume First Time Buyer Tax Credit 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Value of Retail Sales New Car Units New Homes Units Sales are recovering but levels remain below trend demand is pent up
Private Sector Has Led Employment Recovery Accumulated Payrolls (in thousands) Changes In Employment Levels Since 2010 By Sector 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0-500 -1,000 Dec-09 Jan 2010-6 months after the recession officially ended 2010 Census Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 +6.3 mn +5.7 mn -637 K Jun-13 Sep-13 Dec-13 Private Total Federal State Local Private sector efforts were offset by public sector cutting 637K jobs since Jan 2010
16% Short Term Interest Rates At Historical Low Federal Reserve s Federal Funds Policy Interest Rate Target 14% 12% 10% 8% 6% 4% 2% 0% 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 Discount Rate Fed Funds Target Interest rates are at the lowest levels in at least 63 years
Scorecard: Higher GDP Growth in 2013, If Indicator Score Outlook Monetary Policy Positive Low interest rates, ample liquidity (QE3) Inflation Positive Maybe too low, but commodity prices are volatile due to non-us demand Fiscal Policy Negative Budget/debt resolution overshadows near term fiscal policy outlook Financial Sector Positive FDIC s watch list declining, consumer credit more available, slight rise in bond defaults but mostly in stagnant industries Causes of Last Recession Positive Residential real estate sector has already begun the long process of recovery Leading Industries Positive Industries likely to lead growth in this cycle are identifiable and have been investing Production Costs Positive Low interest rates, wages, commodity prices Labor Markets Positive Employment rising in expected industries Global Economy Neutral European debt crisis stabilizing, Emerging Markets deploying expansionary policies if US can get past fiscal budget/debt ceiling Modest recession risk in 2015 as Fed begins to raise interest rates
Container Volume Imports Still Below 2007 Peak 6,000,000 Import Volumes (TEUs) For 15 Largest US Container Ports 5,500,000 12% 5,000,000 4,500,000 3% 5% Upside Base 4,000,000 Downside 3,500,000-6% Model Imports 3,000,000 2,500,000 2,000,000 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 2013 GDP growth forecasts underlying the import forecasts range between 0.4% and 4.4% due to policy uncertainty
US Container Volumes Still Below 2007 Peak 3,500,000 US International Container Volumes By Type 36.0 million 36.3 million 34.5 million 29.6 million 34.2 million 34.7 million 35.4 million* 3,000,000 2,500,000 Total +14.2% +1.5% +1.8% 2,000,000 Total Loaded +10.7% +3.4% +1.6% 1,500,000 Imports +15.2% +0.7% +3.2% 1,000,000 Exports +5.2% +7.3% -0.4% Empties 500,000 +27.1% -4.8% +2.4% 0 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Slowing global economic growth and the 2012 national drought negatively impacted US exports
Unprecedented Grey Tsunami Number of People Turning 65 and Share of US Population: 1900-2050 25% Last Boomers Turn 65 (2026) 2,000 1,800 20% 1,600 Share 15% 10% 5% First Boomers Turn 65 (2011) 1,400 1,200 1,000 800 600 400 200 Thousands of People 0% 1900 1907 1914 1921 1928 1935 1942 1949 1956 1963 1970 1977 1984 1991 1998 2005 2012 2019 2026 2033 2040 2047 0 65 and Over Share of Population (left) Increase in Over 65 Population (right) US has no policy to deal with the economic and financial implications of the Grey Tsunami
China Is Losing Share of US Imports 250 Index of Value of US Imports From China, India and Mexico 200 150 100 50 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Imports Indexed to 100 in December 2008 2012 China India Mexico Rising wages in China make other locations more attractive for outsourcing Automation could offset outsourcing trends
Energy Consumption Patterns Will Change 18 Natural Gas Spot and Relative Prices Per 1 Million BTU 16 14 12 Relative Price 10 8 6 4 LT Average = 3x 2 0 LT Average = 1.5x 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Diesel/Natural Gas Ratio (right) Oil/Natural Gas Ratio (right) Horizontal drilling has significantly changed energy price dynamics Several companies are installing natural gas fuel stations across the US
In Summary Higher economic growth and peak season volumes in 2013 Imports shifting from North Asia to Mexico and South Asia Major shifts in equipment repositioning patterns and fuel Ports Container Terminals Bulk Terminals Marinas Ferry & Roll-On/Roll-Off Terminals Thank you for your attention Waterfronts & Leisure Facilities Moffatt & Nichol was founded in 1945 to provide engineering and consultancy services to the world s maritime industry. Today, Moffatt & Nichol supports port and maritime projects, transportation infrastructure, coastal and environmental restorations, and waterfront developments worldwide. Our capabilities allow us to take a project from conception, through the critical study and analysis process and on to design, engineering and program management. Clients can expect thoroughly integrated projects, completed under exacting quality control standards, with the innovation and creativity for which our firm is known worldwide. Dr. Walter Kemmsies, Chief Economist Moffatt & Nichol, New York 104 West 40th Street 14th Floor New York NY 10018 T 212.768.7454 F 212.768.7936 www.moffattnichol.com Quays & Jetties Cruise Ship Facilities Oil & Gas Terminals Harbors Rivers, Canals & Inland Waterways Naval & Coast Guard Bases Wind Power Development Projects Economic & Market Studies Inspection & Rehabilitation Projects