F ORT B END C OUNTY , T EXAS SH 36A D EVELOPMENT C ORRIDOR R AIL B - PowerPoint PPT Presentation

P RESENTATION T O : F ORT B END C OUNTY , T EXAS SH 36A D EVELOPMENT C ORRIDOR R AIL B USINESS P LAN S EPTEMBER 24, 2014 Presentation By Transportation Economics & Management Systems, Inc.

W HO IS TEMS: P REVIOUS TEMS S TUDIES THAT WERE U SED AS B ASE FOR THE A NALYSIS 1 TEMS, Inc..

B USINESS P LAN SH 36A CONCEPT FEASIBILITY R AIL C ORRIDOR A NALYSIS INVESTMENT GRADE F RAMEWORK World Wide Database Texas Route Financial Freight Development Choice Sub Economic Shipping Model Analysis  Traffic O/D Model USITM, FAF, PCRC  TEU Miles • Rail • Three Markets  Revenues • Highway (Asia, Europe,  Networks  Operating Cost • Water REPORT South America) TEMS Rail Network, PCRC,  Terminal Cost • 14 Foreign GLSLS, etc. Zones • 11 Domestic  Socioeconomics Zones • Census Bureau, BEA, etc. Hinterland Analysis Texas Port and Inland Distribution Model 2 TEMS, Inc..

P ANAMA C ANAL M ODEL : M AJOR M ARKETS OF W ORLDWIDE M ODEL Three Major Markets: • Asia • Europe • South America 3 TEMS, Inc..

K EY T RADE R OUTES A SSESSED IN P ANAMA C ANAL T RADE M ODEL Two Ways to Texas: • Panama Canal • Suez Canal Both will use Big Ships 4 TEMS, Inc..

P ANAMA C ANAL (60’ W ATER D EPTH ) I MPACTS Water Depth(ft) 33 41 43 48 50 51 Capacity of New Panamax ship will increase 2-3 times, and requires 48-51 feet draft 5 TEMS, Inc..

P ANAMA C ANAL I MPACTS : S HIPPING $/TEU Source: Reproduced based on Figure 4.3 Impacts of Containership Size, Service Routes, and Demand On Texas Gulf Ports , TXDOT, 2001 • 2015 Shipping cost will decrease from $0.04/TEU·Mile to $0.02/TEU·Mile (70% loading factor and inflation since 2001). • This cuts shipping line-haul costs in half. • Big Boats will be used for both Pacific and Atlantic shipping. 6 TEMS, Inc..

N ATIONAL P ORTS M ODEL : P ORT F UTURE W ATER D EPTHS AND I NLAND M ARKETS A REAS Future water depth is based on “PANAMA CANAL EXPANSION STUDY PHASE I REPORT - Developments in Trade and National and Global Economies” by US DOT MARAD: Freeport/Corpus Christi Missing 7 TEMS, Inc..

GOODS™ M ODEL S TRUCTURE 8 TEMS, Inc..

T RAFFIC D ATABASE : M ODEL USES S IX C OMMODITY G ROUPS Containerized Commodities • Source Raw Materials Furniture – US Inland Food Trade Monitor Industrial Products ( USITM ) Finished Products – Freight Computers Analysis 1 2 Framework 3 (FAF) ... 12 1 2 3 …. 9 TEMS, Inc..

C OMPETITIVE R AIL AND S HIP T IMES Shipping Time (days) From Northeast Asia to Houston, TX Route Total Time 14 5 19 Pacific (20 mph) (14 mph) Via 21 Panama - 21 (23 mph) Canal Future offers potential rail productivity and service gains. For example, speed improvement from average Source: Parsons Brinckerhoff, Panama Canal Expansion Study, 14 mph to 40 mph (Amtrak June 2012 speed). 10 TEMS, Inc..

S IMPLIFIED R OUTE C HOICE M ODEL (A SIA I MPORT ) 4 L EVEL A NALYSIS Asia Traffic Pacific Ports Atlantic/Gulf (West Coast) Ports Suez Canal Panama Canal Gulf East Coast (Freeport, Houston) North East South East (New York, (Savannah, Boston) Miami) 11 TEMS, Inc..

C URRENT M ARKET : 2006 D ISTRIBUTION OF H OUSTON P ORT C ONTAINERS WITHIN T EXAS Yet very few containers from Houston go to Dallas-Fort Worth . . . Mostly they are reported from Europe, not Asia (consistent with Hinterland Analysis). 12 TEMS, Inc..

C URRENT M ARKET : T EXAS I NTERNAL D ISTRIBUTION Texas Warehousing and Storage Employment 25,000 22,505 20,000 15,000 11,650 10,000 3,585 5,000 1,926 1,591 933 829 679 468 420 222 23 0 Source : U.S. Census Bureau, June 2014 Dallas-Fort Worth has twice the Logistics Employment as Houston. 13 TEMS, Inc..

C URRENT P ORT OF H OUSTON T RAFFIC D ATA • The largest Import is from Europe, and the second is from Asia • Imports form Asia are increasing and China is the largest single importing country. 14 TEMS, Inc..

C URRENT M ARKET – H INTERLAND A NALYSIS A SIA I MPORTS • Strong West Coast advantage with small ships • Houston fares no worse than Eastern Ports Houston Estimated Share: 72% of Dominant Hinterland, but it is a very localized service area. 235K TEUs 15 TEMS, Inc..

C URRENT M ARKET – H INTERLAND A NALYSIS E UROPE I MPORTS Houston Estimated Share: 78% of Dominant Hinterland Area: about half the traffic however, terminates within the local port environs. 317K TEUs 16 TEMS, Inc..

T HE F REEPORT “B UILD ” C ASE • Freeport will be fully developed as a container terminal that can handle big ships (56 ft.) Houston however remains at 45’ channel. • Effective intermodal links will be developed (rail links and inland ports) from Freeport to the key market areas of Dallas, Fort Worth, San Antonio and beyond • Port of Houston can be served by – Second Port of Call – Transloads in Caribbean Port – Trucking from Freeport – COB from Freeport 17 TEMS, Inc..

“B UILD ” B IG S HIP – A SIA I MPORTS (2015) Freeport Estimated Share: Room to grow? 30% of Dominant Area (Low Shares Assumed) 10% of Competitive Area 3399K TEUs 1673K TEUs Texas Competitive Texas Dominant Market Area Market Area Huge (7X) increase in Potential Texas Hinterland Total Market TEUs. However, West Coast Ports retain  50% market 18 TEMS, Inc..

“B UILD ” B IG S HIP – E UROPE I MPORTS (2015) Freeport Estimated Share: 83% of Dominant Area 62% of Competitive Area 457K TEUs Freeport Competitive 361K TEUs Market Area Freeport Dominant Market Area Slight increase in Port Hinterland Total Market TEUs: Freeport Holds Share Against Increased Savannah and LA/LB Competition. Note however, that about half this European traffic is only bound for local port environs. 19 TEMS, Inc..

C ONTAINER I MPORTS VS GDP S - N ATIONAL T REND Imports are closely related to GDP, which is used to forecast imports in the future. Growth rate has been moderated by recent recession. 20 TEMS, Inc..

T EXAS GDP G ROWTH * Texas GDP growth rate is significantly higher than US growth Rate. This growth rate is a key financial assumption that should be further assessed in future studies. Forecast years assume Texas 7%, Grain Belt region 6%, and Midwest region 4% growth per year Average growth rate 5.6% * Source: Bureau of Economic Analysis, 2014 21 TEMS, Inc..

O VERALL T EXAS B IG S HIPS M ARKET F ORECAST * 3,528K 4,000,000 3,500,000 1,288,000 3,000,000 2,500,000 Europe 2,000,000 Asia 1,048K 1,500,000 2,240,000 360,000 1,000,000 688,000 500,000 0 2015 2035 * There are an additional 60k South American and Caribbean containers at Freeport (Great White Fleet) and 185K more at Houston, not included in the above totals – Houston served by boat service topped off in Freeport. 22 TEMS, Inc..

T EXAS P ORT M ARKET S HARE OF A SIAN H INTERLAND TEU S GOES FROM 8% TO 30% Texas Port Asian Traffic 8,000 goes up by 10 7,000 2,315 times in 2035 compared to 6,000 Today 5,000 Texas 4,000 LA/LB LA/LB Asian Traffic into the 5,403 3,000 176 Texas Port 2,000 Hinterland 2,058 more than 1,000 doubles 0 Current Small Ships Future Big Ships 23 TEMS, Inc..

T EXAS P ORT TEU S : “B UILD F REEPORT ” 2015 2035 Tripling of Rail Water TEUs in 20 years “Fills Up” a Single DFW Rail DFW Track Railroad TBD 12 Trains/Day 4 Trains/Day HOU 1,805K HOU 613K each way each way 1,421K 343K SAN SAN 301K 92K FPT FPT Texas Grows by 4x 1 Train/Day 2 Trains/Day each way each way 3,527K 1,048K TOTAL 14 TOTAL 5 Trains/Day Trains/Day each way each way 3 Ships/Week 10 Ships/Week Increase higher than US growth, but conservative compared to Texas State Rail Plan. 24 TEMS, Inc..

R ISK I SSUE 1: W EST C OAST C OMPETITIVE R ESPONSE : I NITIAL S WAG • Will average ship size maintain in the 7-8K TEU range? Most likely this is currently considered near optimal for the length of ocean haul. Biggest ships used for longer Gulf and East Coast movements. • Will price wars between west coast and east coast ports happen? Not likely since the same carriers operate both lanes. Ocean carriers will naturally favor longer water routes. • Railroad’s competitive choices: – Rail may face capacity constraints – Reduce price and keep level of service. Unlikely, since it is losing proposition against low-cost water competition – Improve quality of service. This is more likely with improved service for high VOT goods such as computers and electronics, especially if this service improvement is supported on the water side of the movement. 25 TEMS, Inc..

R ISK I SSUE 1: W EST C OAST C OMPETITIVE R ESPONSE : B ETTER S ERVICE For example, Matson’s “Smaller, Faster, Better” approach may become an effective competitive model for West Coast ports since the expanded Panama Canal option will only increase price pressure on both shipping lines and railroads. “Faster delivery supports higher price.” custommedia.bnpmedia.com/Custom/Home/Files/PDFs/Mats on_adv.pdf 26 TEMS, Inc..