Harris County:Recipient of Global Trends in

Manufacturing and Transportation

By: Curtis D. Spencer, PresidentIMS Worldwide, Inc.

Table of Contents

Global Trends 2014-2019

Manufacturing and Re-shoring

Gulf Coast Resin Boom

Other Harris County Trends

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Global Trends

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1993-1997 1998-2003 2004-2008 2009-2013 2014-2018

6.7

9.6

4.1

1.1

6.7

Five-Year Forecast for U.S. Imports via Ocean ContainerCompound Annual Growth Rates

Forecast developed by JOC Group economist Mario O. Moreno

Compound Annual Growth Rates

Forecast developed by JOC Group economist Mario O. Moreno

Five-Year U.S. Exports via Ocean Container

1993-1997 1998-2003 2004-2008 2009-2013 2014-2018

7.4

2.5

8.8

1.6

2.4

3.5% With New Resin Exports

U.S. Intermodal Volume Growth

2013 20148.7

8.8

8.9

9

9.1

9.2

9.3

9.4

9.5

9.6

9

9.5

In Millions of Intermodal Units

In the first 37 Weeks of 2013 vs. 2014

Source: American Association of Railroads

5.6% Growth

Global Sourcing and

ManufacturingTrends:

Re-Shoring and New US

Manufacturing

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New US-Domestic manufacturing that is made competitive by new resources Natural Gas-new technologies unlocking new sources of

product which provides lower cost feed stocks for plastics-PE and PP specifically but PVC as well, now US is competitive with the worlds producer

New production capacity announced in North America, 9 billion pounds of new production through 2018, some will be on line as early as 2015

Not all about “re-shoring” but about new industry and manufacturing

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Manufacturing Grows in the USA

• Boston Consulting Group’s report in 2012 had everyone expecting “25% Re-Shoring to the USA in the next 5 years” Not going to happen!

• There are indeed some evidence of Re-Shoring coming back into the USA from Asia. Primarily in heavier products/parts, highly automated operations and those requiring quick engineering changes in order to stay ahead of competition

• AND…we are seeing a huge ‘boom’ in basic, heavy manufacturing being started up in the USA-plastics, chemicals, steel, basic metals – all based around Cheap Natural Gas for the next 100 years.

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What is the Real Story in Near Shoring

• New Aluminum Plants, New Steel Plants, New Pipe Plants and basic Chemical Plants are all coming online during the next 5 years in the USA

• How? Cheap Natural Gas.• And, we are seeing a resurgence in Mexican

Manufacturing in auto, home goods and other “heavy products” for US consumption.

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What is the Real Story in Near Shoring

• 191 new or expansions in petrochemical processing• This is $117 billion in the US petrochemical industry• By 2020, the cumulative impact will boost real GDP

by 2.0% to 3.3%• Creating from 2.7 million to as high as 3.6 million

new jobs.• Representing cumulative capital investments

totaling $117.0 billion in the United States, fully 62% of this is foreign direct investment.

• 62% of this investment is foreign direct investmentSource: American Chemical Council, 2014

Chemical, Resin and Plastics MFG.

Strong Investment in Ethylene

• In 2012, 15 billion pounds of thermoplastic resins was exported, PVC was the leading export with a value of $31.2 billion.

• Between 2005 and 2012, the U.S. went from being among the highest cost producers of ethylene to among the lowest cost producers globally.

• Today, the U.S. exports approximately 20% of its production of PE and PP resins.

• When all the new capacity is created, we will export -30%-40% of the total PE and PP Production.

• What Supply Chain Routes will be utilized to Export Resin?

Exporting Plastic Resins

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• In the next 10 years, the Gulf Coast Producers will be needing 350,000 to 400,000 new export containers to capture the new Export Production. (Source: IHS Global Insights 2014)

• Estimates today place 60% of that Resin will be shipped directly out of the Port of Houston to Asia, Europe and S. America

• 15-20% may travel to DFW for packaging and then will route to West Coast Ports and on to Asia.

• 10-15% will travel to Charleston/Norfolk for European Destinations.

Supply Chain Routes for Plastics

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Global Sourcing and ManufacturingTrends - Mexico

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Here is a look at the Evidence for Mexico!

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27

SOURCE: International Labour Organization, U.S. Bureau of Labor Statistics

U.S

. Dol

lar

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2011-2013 WSJ

Since 2003, wages in Mexico have risen 25% compared to 218% in China

What do we see as the “Hottest Markets” not on everyone’s radar Houston Gulf Coast – Resin, Medical, Manufacturing;

Insane levels of investment over the next 10 years. E-Com facilities in dense population clusters; re-working

value added space, cold, cooler, reefer space, for E-Com same-day delivery.

The entire “cold-chain” is growing! Target, WM and others want to control back to the farms. Port of Houston has a huge initiative for Cold-Chain Imports and exports.

Our Firm is working on projects estimated to add over 80,000 New TEUs for the Port of Houston – Export, and 50,000 new TEUs Imported.

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Source: HSBC and Greater Houston Partnership

Change in Employment (%) Top 20 Metro’sJuly 2013 – July 2014

QUESTIONS?

Prepared By: Curtis D. Spencer, PresidentIMS Worldwide, Inc.