Office of Market Research and AnalysisJune 2012

Onésimo V. Sánchez

The Panama Canal Expansion: Potential Impact on Logistic and Supply Chains

1915 – 2011 Total Number of Transits: 1,015,656Amount of Cargo: 8,810,111,605 LT

Construction of the Panama Canal was a GAME CHANGER for World Trade

Source: Compair Data, October 2010

Principal Users of the Canal FY 2011(in Million Long Tons)

USERS FY 2010 FY 2011 2011 (%)

United States 135.3 144.4 65

China 43.6 53.1 24

Chile 26.7 28.9 13

European Union 26.8 24.2 11

Japan 22.7 22.6 10

South Korea 19.1 19.1 8

Peru 12.9 15.3 7

0.0%10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Seaborne Exports Seaborne Imports

Relative Importance of the Canal on the International Seaborne Trade of Countries in the Americas

2011

Source: ACP with information of IHS, Dec 2011

Tonnage by Market Segments FY 2010 – FY 2011

11.30

7.78

10.34

14.59

46.56

33.05

72.59

104.59

11.71

9.19

10.77

12.83

48.99

34.68

79.94

113.59

0 20 40 60 80 100 120

Others

General Cargo

Passenger

Refrigerated

Tanker

Vehicle Carrier

Dry Bulk

Container

PCUMS (in millions)

FY2011

FY2010

Source: Compair Data, October 2010

Liner Services ThroughThe Panama Canal

Trade RouteNumber of Services

Yearly Capacity

Number of Vessels

Average Vessel Size

RotterdamAntwerpDunkirk

Hamburg

BilbaoMarin

Guayaquil

Callao

San Antonio

MejillonesAntofagasta

Manta

Cartagena

Ensenada

ManzanilloKingston

P. Caucedo

Manzanillo Port of SpainP. Cabello

Cristobal

Chiwan

ShanghaiBusan

NingboKaohsiung

Qingdao

Hong Kong

JacksonvilleHouston

Miami

SavannahCharleston

Mobile

New York

Tangier

Dubai

SidneyMelbourne

Napier

Tauranga

Papeete

LautokaNoumea

Tilbury

Le Havre

San Juan PR

Iquique

Ilo

Taipei

Pyongtaek YokohamaTokyo

Yantian

Los Angeles

Oakland

Norfolk

MelbourneTauranga

Sidney

Timaru

Auckland

Port Chalmers

Vancouver

Balboa

Seattle

Lázaro Cardenas

Pto. Quetzal

La SpeziaNaples

Valencia Gioia Tauro

Source: Compair Data, January 2012

Asia - USEC 12 2,854,409 112 4,579

Pendulum 2 492,021 27 4,716

WCSA - Europe 8 1,210,063 58 3,006

Asia - Caribbean 1 236,625 12 4,538

WCSA - Caribbean 1 45,552 3 1,248

WCSA - USEC 3 431,535 18 2,972

Oceania - USEC - Europe 2 796,066 16 2,945

USWC - Europe 3 489,988 30 3,132

Total de Servicios 32 6,556,259 276 3,867

Port Development in Panama1996: 235K TEUs2010: 5.6 M TEUs2011: 6.5 M TEUs2015: 8.4 M TEUs (F)2020: 12.4 M TEUs (F)

Panama Ports Company – Cristobal

Colon Container Terminal Manzanillo International Terminal (MIT) Panama Ports Company - Balboa

PSA

6.5 million TEU, 18.5%

Transbordo en el Caribe: un triángulo

63.1%

4.9%

16.4%

15.6%

Las economías de escala implican una menor tolerancia de desvío

Fuente: Jean-Paul Rodrigue, Universidad de Hofstra, Nueva York, mayo 2012, presentación en seminario de logística-BID, Quito, Ecuador

Puerto Barrios326K

1

Santo Tomás 392K

1

Puerto Cortes 583K

2

Puerto Quetzal 583K

0

Freeport 1,125K16

Caucedo 1,004K 5

Haina 288K

3

Kingston 1,891K 19

Acajutla 145K

0

Limon /Moin 858K

1

MIT/CCT/Cristobal2,810K

34

Balboa/PSA 2,758K

25

Cartagena 1,581K

12

La Guaira 333K

5

Puerto Cabello800K

0

Caldera 155K

0

Port nameMovement in TEUs

Quay cranes

Profile of main ports in the region(movements in ‘000 of TEUs for 2010 and number of quay cranes)

La Habana 228K 0

Barranquilla 103K

0

Buenaventura 662K

4

Port Spain 389K

5

Point Lisas 184K

2

Jarry 150K

4

Producción: Servicios del Clúster (2008 - Millones)

Code Description Y0 X0CFZN Zona Libre de Colón 1,942.2 2,261.7CNOP Operación del Canal 1,623.7 1,623.7PORT Puertos 525.1 502.4AGNT Agencias Navieras 278.5 329.4CHTR Operadores de Turismo en el Canal 239.2 239.2MFUL Combustible Marino 216.7 292.9LINE Líneas Navieras 167.7 153.4MMER Marina Mercante 146.6 146.6CRUS Cruceros 123.8 123.4XPRC Zonas Procesadoras de Exportación 118.2 129.8LEGL Servicios Legales 110.2 136.9BRPR Reparación y Mantenimiento de Barcos 86.1 86.1ITMS Servicios Intermodales 77.4 74.9RAIL Ferrocarril 46.3 38.3BOAT Suministro a Barcos 31.9 31.9PPLN Oleoducto Transístmico 29.1 29.1PILO Servicios de Pilotaje 25.3 25.3KNOW Ciudad del Saber 22.8 23.2CLAS Clasificación de Naves 14.7 14.7CNTR Reparación y Mantenimiento de Contenedores2.6 2.6DREG Dragado 0.5 0.5

Total: 5,828.7 6,266.2

Panama Canal TodayPanama Canal in 1914

El comercio global continuará

Canal Expansion Program Components

• Deepening of Pacific and Atlantic entrance channels

• Deepening and widening of the Gatun Lake navigation channel

• Construction of new access channel for Pacific Locks

• Construction of new Post Panamax Locks and water saving basins in the Atlantic and the Pacific

• Increase the maximum operating level of Gatun Lake

The Panama Canal - 2014

It’s all about economies of scale!

19

It is all about economies of scale, improving efficiency, productivity, and profitability

Operational EfficiencyFuel EfficiencyImprove Vessel Utilization Competitiveness

20

It is all about economies of scale, improving efficiency, productivity, and profitability

Price: Supply/Demand DrivenProfitability: Improve Financial Efficiency

Environmental Sustainability

21

Ripple Effects and Other Factors

Ports: Ready/not ReadyAdequate Rail/Road ConnectionsLand Value: Adjacent to Ports Transshipment (Caribbean Triangle)Logistics/Supply Chain (Near Sourcing)Value of Ships - Charter Rates

Locks and vessels sizes

294.1 m (965’)

33.5 m (110’)

32.3 m (106’)

304.8 m (1,000’)

12.8 m (42’)

366 m (1,200’)

55 m (180’)

49 m (160’)

427 m (1,400’)

18.3 m (60’)

12.4 m(39.5’)12.4 m(39.5’)

15.2 m(50’)

Existing locks' maximum vessel size: 4,400 TEU

New locks' maximum vessel size: 12,600 TEU

New locks

New locks

Existing locks

Existing locks

23

Equa

tor

Main Global Container Transportation Flows

Landbridge

Westbound Route

Eastbound Route

PanamaRoute

East Asia

South AsiaIndifference Point

Southeast Asia

PANAMAX

POSTPANAMAX

24

Equa

tor

Main Global Container Transportation Flows

Landbridge

Westbound Route

Eastbound Route

PanamaRoute

East Asia

South AsiaIndifference Point

Southeast Asia

POSTPANAMAX

POSTPANAMAX

Impact of Expansion on Container Services

(Lines Perspective)

Panama provides easy access to consumers located in Latin America, the Caribbean, North America, Asia and Europe

The expansion will extend the Canal’s area of influence

México +18.9%

Pop: 135M

Guatemala, El Salvador, Belice, Honduras, Nicaragua. +28.0%

Pop: 19M

Costa Rica, Panama +23.0%

Pop: 19MColombia, Venezuela

+22.0%Pop: 88M

Ecuador, Perú, Bolivia, Chile

+20.0%Pop: 85M

Uruguay, Paraguay, Brazil, +18.0%

Pop: 251M

Argentina,+17.0%Pop: 48M

Caribe, Cuba, Puerto Rico, República Dominicana, Jamaica, Haití +11.0%

Pop: 42M

SOURCE: «US CENSUS: International Database»

Latinamerica Population / Growth Projection

2010-2030

OVERALL POPULATION+19%, 700M

Retail Sourcing Trends

31

2011 Top Sourcing Locations China Vietnam India Mexico Indonesia Bangladesh Thailand Sri Lanka Korea EU Central America

3/15/2012Casey Chroust, EVP, Retail Operations

Retail Industry Leaders Association

Latin America By The Numbers

• 59% of retailers said their supply chains include distribution to and from Latin America

• 25% currently have retail operations in Latin America

• 30% currently have distribution operations in Latin America

• 58% consider entering or expanding Latin American operations in the next five years

Note: RILA Member Survey

323/15/2012

Fuente: The Economist

Crude oil: Ecuador – US Gulf

Panama: 2,047 nmMagellan Strait: 10,972 nm

Savings 8,925 nm ,15 knots, 26 days less

Potential Post Panamax TradeCrude Oil

117,055 DWTAframax

LNG: Trinidad & Tobago – Quintero, Chile

Panama: 3,782 nmMagellan Strait: 6,750 nm

Savings 2968 nm, 19.5 knots, 6.3 days

Cargo capacity:145,000 m3

PostPanamax

Potential Post Panamax Trade LNG

36

N

C

S

E

LONG DISTANCE & HIGH DENSITY : LARGE VEHICLESHORT DISTANCE & LOW DENSITY: SMALL VEHICLE

NC

S

W

Network Economics

37

Conventional

NorthAtlantic

CentralAtlantic

South Atlantic / Gulf

Direct

Transshipment Circum-Equatorial

NorthAtlantic

CentralAtlantic

South Atlantic / Gulf

CaribbeanTransshipmentTriangle

NorthAtlantic

CentralAtlantic

South Atlantic / Gulf

Source: Jean-Paul Rodrigue, PHD

El puerto como un componente de la cadena de transporte

FORELAND PUERTO HINTERLAND

Redes detransporte

Operaciones delmuelle

Corredores de

Operaciones del puerto

transbordo

Apilamiento

Terminales internas

Zonas de logística

Fuente: Jean-Paul Rodrigue, Universidad de Hofstra, Nueva York, mayo 2012, presentación en seminario Logística-BID, Quito Ecuador

¿Cuál es la importancia del transporte trans-país?

ANTE-PAÍS

90%

10%

Distancia

20%

80%

TRANS-PAÍS

Costo

Puerto

Fuente: Jean-Paul Rodrigue, Universidad de Hofstra, Nueva York, mayo 2012, presentación en seminario Logística-BID, Quito Ecuador

Comercio internacional, cadenas y flujos de transporte: De la facilitación a las cadenas de suministro:

Cadena de transporte

Red

Comercio internacional

Flujos físicos

A B

AFerroviaria

TransbordoComposición

Centro de transbordo

BMarítima

Descomposición

Aduana

Puerto Centro de distribución

Patio ferroviario

A BOrigen Destino

Procedimientos aduaneros

Facilitación del comercio

Facilitación del transporte

Facilitaciónde la logística

Fuente: Jean-Paul Rodrigue, Universidad de Hofstra, Nueva York, mayo 2012, presentación en seminario Logística-BID, Quito Ecuador

Componentes del Índice de Desempeño Logístico, países latinoamericanos seleccionados, 2010

Fuente: Jean-Paul Rodrigue, Universidad de Hofstra, Nueva York, mayo 2012, presentación en seminario Logística-BID, Quito Ecuador

GAME CHANGERS REQUIRE STRATEGIC PLANNING

Onesimo V. SanchezOffice of Market Research and AnalysisPanama Canal Authority