rob shepard international forest products trans-pacific exporter issues: an exporter’s perspective...
TRANSCRIPT
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Trans-Pacific Exporter IssuesAn Exporter’s Perspective
Rob Shepard
Director of Transportation & Logistics
The Kraft Group/International Forest Products
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 2March 1, 2010
The Kraft GroupEntertainment Businesses
Forest Products Businesses
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 3March 1, 2010
OUTLINE
1. Why Exporters are the way they are
2. The Dilemma Carriers Face on Exports
3. Carriers’ Impact on Forest Products
4. Current Issues facing Exporters
5. What will happen after Chinese New Year
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 4March 1, 2010
EXPORTERS ARE TRADERS
Source: JOC
1. Why Exporters are the way they are
Importer Sector TEU'SWal Mart RETAIL 720,000Target RETAIL 445,800Home Depot RETAIL 300,400Sears RETAIL 229,400Dole FOOD 216,900Costco RETAIL 195,400Lowes RETAIL 182,100LG CONGLOMERATE 170,600Phillips ELECTRONICS 127,200Chiquita FOOD 113,650Heineken FOOD 108,200Ikea RETAIL 100,300Ashley furniture RETAIL 96,700GE CONGLOMERATE 89,200Jarden APPLIANCES 80,500Samsung ELECTRONICS 51,100Redbull FOOD 50,000Nike RETAIL 50,300JC Penny RETAIL 63,400Whirlpool APPLIANCES 49,600
TOP 20 IMPORTERSExporter Sector TEU'SAmerica Chung Nam FOREST PRODUCTS 220,700Weyerhaeuser Co. FOREST PRODUCTS 147,100Cargill Inc. FOOD 127,800Koch/GP/Harmon FOREST PRODUCTS 111,800International Paper FOREST PRODUCTS 107,400Dow Chemical CHEMICALS 106,600Du Pont CHEMICALS 98,900Potential Industries FOREST PRODUCTS 87,700P&G CONSUMER GOODS 80,600MeadWestvaco FOREST PRODUCTS 75,500Allan Co. FOREST PRODUCTS 72,300Archer Daniels AGRICULTURE 63,800BASF CHEMICALS 63,000Delong ANIMAL FEED 61,800Exxon Mobile CHEMICALS 60,200J.C Horizon FOREST PRODUCTS 60,000Denison FOREST PRODUCTS 58,400CGB Enterprises AGRICULTURE 57,800Sims METALS 57,600Canusa Hershman FOREST PRODUCTS 57,300
TOP 20 EXPORTERS
AND FOREST PRODUCTS IS THE TOP EXPORT
IMPORTERS ARE BRANDS
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 5March 1, 2010
• US Exporters compete against Global Markets• Majority of TEU Export tonnnage is low value
– Look for every advantage – Need efficiency & economy of movement
• Freight critical to trades– Most Efficient Routing Options– Find Best ways for Container Utilization
• Sourcing decisions can be based on Freight
1. Why Exporters are the way they are
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 6March 1, 2010
1. Why Exporters are the way they are
Breakdown of Costs for FCL Shipment
0%
20%
40%
60%
80%
100%
Apparel Footwear KLB Wastepaper
FreightDutiesCOGS
Freight Accounts for 30% of Landed Cost for Forest Products
And Exports have much Lower Margin that can’t tolerate additional Costs
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 8March 1, 2010
J-9
5J
-96
J-9
7J
-98
J-9
9J
-00
J-0
1J
-02
J-0
3J
-04
J-0
5J
-06
J-0
7J
-08
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9
Eastbound Westbound
• Export rates started deteriorating 13 years ago
• Imbalance of Trade kept rates depressed
• Change in cargo type also contributes to this
• Export rates near 10 year high
Historical Rate Levels on Transpacific Container Trade
Souce: Containerization International
2. The Dilemma Carriers Face
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 9March 1, 2010
Drop in Imports has led to more balanced Tradelane
• Less Backhaul pricing for commodities that have depended on it
• Exporters assumed immediate service & unlimited capacity
• Little margin to store cargo for any time
1.9
1.41.5
1.72.0
0
2
4
6
8
10
12
14
16
18
20
2005 2006 2007 2008 2009
Mil
lio
ns
TE
U
1.2
1.4
1.6
1.8
2
Ra
tio
of
Imp
ort
s:E
xp
ort
s
Imports Exports Ratio
2. The Dilemma Carriers Face
Source: JOC
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 10March 1, 2010
• If Carriers raise rates to compensatory levels, export volumes of base cargoes will drop sharply
• If Carriers keep rates at low levels to promote trades, they only hurt themselves
• In tight export markets, if Carriers abandon the larger volume base cargoes, they jeopardize damaging long term relationships and impacting sourcing decisions
2. The Dilemma Carriers Face
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 11March 1, 2010
• Largest volume commodity – 25% of Exports
• Steady Base Cargo
• Matches up with Carrier Asset management model– Waste paper prevalent around dense population areas– Pulp/Paper routing to Port Stuffing Sheds: Port – Port
• Good for forecasting – correlated to GDP growth
• Sustainability
Why Carriers should stay committed to Forest Products 3. Carriers’ Impact on Forest Products
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 12March 1, 2010
% of Wastepaper Volume to China by US Coast
25%
35%
45%
55%
65%
75%
A-09 M-09 J-09 J-09 A-09 S-09 O-09 N-09 D-09
West Coast East Coast
• In Nov. Carriers imposed a two tier BAF formula making West Coast BAF $42/40’ less than East Coast BAF
• USWC WP gained $1.75/MT advantage
• Immediately impacted Flows
• Shows China will buy Fiber from lowest cost source and rate sensitivity of WP trade
WTSA BAF Policy on WP: USWC = $44/40’; USEC = $86/40’
Souce: USITC
Note uptick in West Coast Volume in Nov after BAF Split
3. Carriers’ Impact on Forest Products
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 13March 1, 2010
Exporter Issues• Rate: Rate Request turnaround, Rate Validities• Space: Allocation guarantees, Service Changes• Does Automation in Booking Process work?• Equipment, Booking Execution, Doc Turnaround• Shortened Delivery Windows with tighter cutoffs• Port Congestion & Supply Chain Capacity constraints• Free Time/Avoiding unnecessary charges
4. Current Issues Facing Exporters
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 14March 1, 2010
Keeping up with the GRIs40' Rate USEC - CNBP
$150
$86$86
$86$150
$150
$100
Q2
Rat
e
Oct
GR
I
Oct
BA
F
Nov
BA
F
DE
C B
AF
Jan
GR
I
Feb
GR
I
Mar
GR
I
Cur
rent
Rat
e
• Carriers cannot offer quotes to extend to Q2
• GRI announcements made with little notice to sell increase
• Announcements difficult to keep up with
• Rate Levels are deterring trades
4. Current Issues Facing Exporters
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 15March 1, 2010
The Reality of a Tight Market
• Lack of Equipment at most ports– Smaller ports getting squeezed
– Reduction of Inland CY Locations
• Less allocation due to reduced vessel capacity– Need to book farther in advance
– Booking confirmation <> Space & Equipment guarantee
– Requires tighter execution of supply chain partners
• Shorter times for booking execution– Increased chance of rolled bookings/per diem fees
4. Current Issues Facing Exporters
Rob Shepard
International Forest Products
Trans-Pacific Exporter Issues: An Exporter’s Perspective
Page 16March 1, 2010
What will happen after Chinese New Year?• Asia sitting on large raw material inventories• Weather, other factors impacting supply• Waste Paper Generation down due to no imports• High FOB Costs for Material & High Freights• All Commodities facing tight supply; less export• Tightening credit in CN due to economic fears
Will China buy at same rate after CNY as before Will deployment of Peak Season Capacity create
relief for current Exporters’ woes