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Home , Containerization, Transloading

Maritime Industry

Mr. Dave DeBoer Lesson Objectives

• Introduction to the basic principles and components of the Maritime industry

• Introduction to the Maritime industry’s issues and challenges in the 21st Century

• Understand the U.S. Maritime industry’s contribution

2 Maritime Industry

Maritime transportation has many moving parts and they all have to work together in unison Issues in one area have a tendency to impact other areas

1. Trucker Shortages 2. Congestion 3. Rail Congestion 4. Chassis Shortages 5. Vessel Alliances 6. Weather 3 Quick (Rough) History

• 5000+ Years of Maritime Trade • Phoenicians – Greeks – Romans – Venetians – all operated merchant fleets • Dutch – Spanish – British – US etc. (you get the picture) • Trade Routes

• Evolutionary Developments • • Iron ships, screw propellers • Steam, diesel , and LNG propulsion plants • Friction reducing, self sealing paint, fuel additive, hull cleaning • ships getting LARGER • RO/RO Vessels getting wider and longer 4 Quick (Rough) History Cont

• Evolutionary Developments – Seaports – Productivity improvement efforts – Canals: Suez – Panama – Intermodal Transportation – Railway – Landbridge, Mini-Landbridge – Stack – Trucks – Sizes, Economy, Environment – -Air, on West Coast 5 Maritime Industry Principles

• Maritime industry devoted to moving goods or passengers by water. (That simple…) • A service business… • Maritime Activities: • Vessel Operations (merchant shipping) • Shipbuilding (merchant & naval) • • Marine Resources (Offshore oil/gas) • Marine Fisheries (Marine fishing, seafood processing) • Other (Marine Tourism, R&D) 6 Maritime’s Link to Global Economy

• Ships carry 99% of overseas trade in volume terms and 62% in value terms, the remainder being conveyed by air • 90% of all moves by sea • Globally, the ton-miles of freight moved by water are more than twice the total ton-miles of freight moved by , railway and air combined… • Water transportation is less costly and more energy efficient than other modes:

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Source: http: www.wistrans.org Major Industry Challenges

• Overcapacity • Freight rates • Contending with Industry Consolidation • Prioritizing Maritime, Freight Investments • Operating costs • High fuel prices • Contending with Labor disputes • Environmental restrictions • Piracy/Security • Labor shortages 8 Industry Framework

• Dominated by large Multinational Companies with global ocean and multimodal networks • Capitol Intensive • Short commercial life span for a container vessel? • Other types of vessels up to 40 years • High Barrier for entry • Highly Regulated • Governments • Flags of Convenience • Host nation flags • If you are a US Flag Vessel? • History of deep swings in profits and loss cycles • Profitability impacted by supply and demand 9 • Operating costs drive decisions in a “For Profit “ business. Large Multinational Corporations Top Container Lines as of August 2017

Rank Company TEU Market Share # of Ships 1 3,570,355 16.80% 662 2 Mediterranean Shipping Co 3,133,328 14.70% 511 3 CMA CGM Group 2,497,101 11.70% 489 4 Cosco 1,886,402 8.50% 329 5 Hapag-Lloyd 1,491,284 7.00% 213 6 Evergreen 1,058,530 5.00% 194 7 OOCL 669,902 3.20% 100 8 Yang Ming Marine 586,068 2.80% 97 9 Hamburg Sud Group 556,068 2.60% 105 10 MOL 544,504 2.60% 77 11 NYK Line 540,702 2.50% 97 12 Pacific International Line 381,174 1.80% 136 13 ZIM 366,689 1.70% 75 14 219,396 1.00% 87 15 X-Press Feeders Group 160,985 0.80% 100

6,035 Ships with 5,172 Pure container ships

21,338,548 Total Global TEU's 10 Aug-17 Alpha Liner Let’s talk Cost

11 18,000 TEU container vessel Vessel Construction $190 M Containers for vessel $ 63 M Support Equipment $ 14 M Total $ 267 M

OPERATING COST VOYAGE COST

1. Crew Cost 1. Fuel Cost 2. Repair And Maintenance 2. Port charges 3. Insurance 3. Canal Charges 4. Administration including Loan 4. Daily Cost of the 5. M & R 5, Stores and Oils

12 Other Costs

Regulations having an impact on shipping costs

After January 1 2015 ships operating within Emission Control Areas (ECAs) are required to burn fuel with less than 0.1% sulfur content

Cost prior to Jan 1

tons per day days cost per ton Cost per voyage 380 18 $322.50 $2,205,900.00

Cost post 1 Jan 2015 assuming in ECA zone 38% of voyage

tons per day days cost per ton Cost per voyage 380 18 $408.00 $2,790,720.00

Inc. cost $584,820.00

13 Emission Control Areas (ECAs) are sea areas in which stricter controls were established to minimize airborne emissions (SOx, NOx, ODS, VOC) from ships as defined by Annex VI of the 1997 MARPOL Protocol which came into effect in May 2005. How to contain costs?

1. Transfer Costs to others

2 M Alliance 1. Terminal Handling Fees MAERSK 2. Documentation Fees MSC 3. Shipper/receiver supplies their own chassis Ocean Alliance 4. Fuel Surcharges CMA-CGM China Shipping Cosco 2. Enter into Alliances Evergreen OOCL 1. Increase Frequency The Alliance Hapag-Lloyd 2. Broaden Scope of Service NYK 3. Reduce cost of operations MOL Yang Ming

14 What does Alliances do for a shipping company?

Optimization: • For example, an alliance that offers multiple weekly sailings can eliminate somw of their ships

• Expanded geographic cover with fewer vessels

Supply Chain Benefits • With Alliance an Ocean carrier alliances can better analyze, forecast, and capacity-plan for their fleet.

Lower Cost • unit costs will decrease

Enhanced Service • increased competition among alliances should bring about improvements in service, as well as improved solutions for their customers.

Source : http://www.gocatapult.com/ 15 Basic Concepts to think about Think space…Think volume…Think efficiency

• RORO/breakbulk transportation • Cubic Feet (12X12X12 divided by 1728) • Long Ton = 2240 pounds • Short Ton = 2000 pounds • Metric Ton = 2204 pounds • Measurement Tons (1 M/T equals 40 Cubic Feet)

• • Impact of containers on the globe (see “The ”) • of container sizes • 20’, 40’, 45’ • Unit of measure Twenty Foot Equivalent Units (TEU) • Slot costs • Cost per TEU per mile 16 Types of Vessels

• Container – Made door-to-door delivery possible • Roll-On-Roll Off (RORO) • Lift-On-Lift Off (LOLO) • • General • Float-On-Float Off (FLOFLO) • Bulk(Dry and Wet) Tankers • Cruise • • Tug • Specialized • – Liquefied Natural Gas (LNG) 17 • Chemicals – Forest Products – Refrigerated Panamax – Post Panamax

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Source: http://www.oil-electric.com/2011_08_01_archive.html What does an expanded Panama Canal mean to me?

Lower transportation Costs

• Relieves port/rail congestions on the US West Coast • One ship carries as much as 16 trains worth of • Doubles the canal's capacity • Larger cost effective ships transiting the canal • Better through put of cargo ships with no dwell time • Allows US Exporters/Importers better access to China and other Asia destinations • Lower environmental impact using all water services 19 Business Models

• Liner Services • Fixed schedules to fixed ports • Tramp Services • Chases the cargo… • Contract/Charter carriers • Employed by one shipper • Numerous types of hiring terms • Company Fleets • Exclusively moves company products 20 Types of Vessels

• Container

• Roll-On-Roll Off (RORO)

• Lift-On-Lift Off (LOLO)

21 Containers carriers providing factory to foxhole capability

Global service offerings Include intermodal routes and equipment Container Ships

23 Class of Container Vessels

24 Container shipment: How it happens Twist lock: how containers stay connected

Containerization enables cargo to move seamlessly in the supply

A process continually striving to reduce costs by removing waste, rework and redundancy Container shipment: How it happens

1. Ship is separated into Bays, Rows, and tiers 2. Origin(s) load by port of discharge and priority of final destination of cargo 3. Discharge port unloads by final destination of cargo 1. Cargo traveling the furthest from load port is usually off first • Discharge Operations • Containers move direct to on-dock rail for loading to outbound trains • Local containers staged in port for local pickup • Train or truck to final destination Container Terminal Layout

Main objectives

1. Minimize vessel turnaround times

2. Maximization of quay throughput.

Areas of optimization

(1) ship planning (2) storage and stacking (3) optimization

Source :http://www.orms-today.org/orms-4-07/ports.html RORO vessels provide shippers with access to the global marketplace

Ro-Ro is an acronym for Roll- on/roll-off. Roll-on/roll-off ships are vessels that are used to carry wheeled and breakbulk on MAFI cargo. The cargo for the ship is loaded and unloaded by means of built-in ramps.

29 Anatomy of a RORO Carrier

A floating parking garage with limitations based on the height of the stern door, how much weight the stern ramp can support , and internal flexibility of deck heights Cargo Rolls On or Rolls Off

31 If it can’t roll on itself MAFI trailers RORO Terminal Yard

How to get these cars on that ship the most efficient and least expensive way possible?

Main objectives

Minimize vessel turnaround times

Maximization of throughput.

Areas of optimization

Ship planning

Yard logistics

Transport optimization Once inside the ship..the more we fit the better things are…..

34 Pure Car Truck Carrier PCTC

• Optimized for cars and mix of cars, trucks and heavy rolling units

• Versatile in terms of cargo mix and load

• 3-5 Lift-able car decks

• Slender hull, but able to carry heavier cargo than a PCC

• In US Flag Operations they are commercially viable and military useful RORO Carrier • No fixed car decks

• RORO carriers are optimized for High & Heavy cargo with cars as supplementary cargo

• Stern ramp 250 < 500 tons

• 3-4 Hoistable decks

• More full body hull than a PCTC – heavier cargo Bulkers/Heavy Lift vessels

Traditional loading methods for bulk ships What’s new in the news

Safety of Lift At Sea (SOLAS) Mis-declared container weights have a serious impact on the stability of vessels, trucks and terminal equipment. This can pose a threat to the safety of workers in the industry and even endanger lives.

38 Ports • Stakeholders: • Port Users: • Carriers- ship owners transport cargo • Shippers and passengers • Port service providers • Fuel, Steam, Waste Removal • Terminal operators, ship agents, freight forwarders, customs brokers • • Suppliers • Shipyards / Maintainers • Long Shoremen

39 Port Sizes and Internal Operations Vary Port to Port

Ports of Los Angeles and 40 Long Beach, California Port of Miami, Florida Obstacles facing ports today

• Greater operational complexity resulting from much bigger ships • Managing congestion risk • to accommodate Mega Ships • Staying profitable though economic cycles • Contending with Industry Consolidation • How do you grow the port? • Non Commercial Development encroaching on Port property • Environmental issues to grow and dredge • Labor • Stoppages/Strikes • Productivity-use of technology • Growing a work force that require new skill sets • What to invest in? • Port Infrastructure • Growing warehousing and distribution facilities 41 • Road access to the facility 42