Use of hubs in the Container Terminal Industry Carl Jensen, Vice President APM Terminals International (Singapore Regional Office) IAPH Forum, HCMC Vietnam.

Use of hubs in the Container Terminal Industry

Carl Jensen, Vice PresidentAPM Terminals International (Singapore Regional Office)

IAPH Forum, HCMC Vietnam 2007

Agenda

1. Introduction to APM Terminals2. What is a Hub?3. Why use Hubs?4. Different characteristics of Hub versus

Import/Export terminals5. Requirements for a successful Hub6. Drivers for investment7. Outlook and general industry trends8. Q&A

Part of the A.P. Moller - Maersk Group

Panama City

Charlotte

Rotterdam

Capetown

Muscat

Beijing

Singapore

Global offices

Regional area offices

Asia Oceania Office(Singapore)

West and Central Asia

office (Muscat)

Sub-Saharan Africa

office (Capetown)

Greater China Office(Beijing)

North America Office

(Charlotte)

South and Central America

office (Panama City)

Head officeThe Hague, Netherlands

Europe Office

(Rotterdam)

Core business

APM Terminals’ core business is to provide container shipping lines with operation and management of container terminals.

In addition to this, the company is also involved in:

Stevedoring Provision of various value added services Free trade zone development Work as port authority

APM Terminals’ global portfolio

Terminals

Projects

Tacoma

Oakland

Los Angeles

MiamiPort Everglades

NewarkBaltimore

Port ElizabethPortsmouth (2)

CharlestonJacksonville

SavannahHouston

New OrleansMobile

Kingston

Itajai

Buenos Aires

DoualaOnne

Apapa

Tema

Abidjan

TangierAlgeciras

Le HavreZeebrugge

AntwerpRotterdam

WilhelmshavenBremerhaven

Aarhus

Genoa Constantza

Gioia TauroCagliari

Port SaidAqaba

Salalah

Colombo

Port QasimPipavavMumbai

Tanjung Pelepas

Laem Chabang (2)

YantianXiamen

Kaohsiung

Shanghai Yangshan

KobeYokohama

Dalian (2)Tianjin (2)

Cai Mep

Nansha

Operating more than 40 terminals

11 terminals currently expanding

13 projects under implementation

28.9 million TEU in 2006

Serving 60 shipping lines

More than 500 gantry cranes

18,000,000 m2 yard

37 kilometers quay

18,000 colleagues

What is a hub?

“In a hub and spoke system of containerized seaborne trade, cargo from a number of origins (feeder ports) is delivered (either by road, rail or sea) to a primary hub port. The containers are then typically transported by sea to its destination seaport, whereby it is then forwarded on to its final destination by road, rail or sea.”

There are also hub ports where shipping lines for route and network optimisation reasons, relay (tranship) containers between vessels operated on different trade routes.

The hub and spoke system has been in use in various forms of transportation and remains a favored system largely for its

transportation economics.

Why hub?

Hub terminals optimize transportation:• Creates access to new markets, not serviceable by direct services• Enables shipping lines to provide timely efficient market coverage,

normally not viable through direct services to terminals (particularly in developing world)

• Allows shipping lines to deploy large ships creating economies of scale• Also allows shipping lines to increase network coverage• Promotes development of free trade zones and other value adding

industries

Import / Export terminals create value as well:• Makes local trade competitive and directly supports trade growth• Direct services provide faster main market coverage• Promotes local manufacturing and provides positive long term economic

impact

Hubs facilitate economies of scale drive lower unit transportation costs!

Hub versus import / export terminals

Characteristics:

Hubs• Low / zero local cargo base• Focus on water connections• Focus on quay and equipment• Located close to main shipping routes at strategic locations• Hub and spoke or relay

Import / Export • Captive local cargo base• Focus on land connections and gate• Located close to manufacturing bases• Import / Export focus

In short, they are different business propositions!

Requirements for a successful hub

The right infrastructure:• Channel depth (16-17

meters)• Adequate channel width• Unhindered turning basins• Less tidal restrictions• Hinterland connectivity• Road / Rail access• 22-23 row outreach of STS

cranes• Wheel load capacity of STS

cranes >100T• Adequate number of all

handling equipment

The hub ports (or ports aspiring to become hubs) must cater to service today’s 10,000TEU + vessels……..

11000 TEU

±25 wide 7 high

8000 TEU

±17 wide 7 high

3500 TEU

13 wide 4 high

Requirements for a successful hub

The right service levels• Productivity >35 moves per hour• High crane intensity• IT / IS to support such demanding production lines• Educated labor force• Seamless interface between vessel, container port and

hinterland• Low cost

In short, carriers demand high service levels at low costs………

Requirements for a successful hub

And of course, you must deliver adequate returns to investors………

Investment Drivers

The investment drivers for Hubs and Import / Export ports are different:

Hubs• Location, Location, Location. Ideal location has large import/export hinterland,

strategically located along trunk route to also serve as hub port – either as hub and spoke or relay or both e.g. Busan

• Unstable return based on volatile market• Long to very long term view• High entry / exit barriers and risk

Import / Export• Promising local economy• Potentially high return, but dependent on local market conditions• Medium to long term view• High entry / exit barriers, but lower risk

Hubs by their nature carry higher levels of investment risk!

Market Share(Top-4)

10.1% 10.7%13.1%

6.9% 7.4%

9.1%6.7%

7.7%

9.2%5.8%5.9%

7.7%

2006 2007 2011

DP World

APM Terminals

PSA

Hutchinson

130 M TEUTop-4 29%(Top-10 38%)

153 M TEUTop-4 32%(Top-10 42%)

263 M TEUTop-4 39%(Top-10 52%)

Outlook / General Industry Trends

• Continued high levels of interest in ports and terminal business sector

• High growth to continue, bottlenecks in some areas

• Public private partnership• Increasing scale• Hubs to continue to develop grow

(as will direct calls)

High Growth Area

Market Growth 1996-2011

0

100

200

300

400

500

600

700

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

TEU Mill

442 M

673 M

158 M

236 M

CAGR 2007- 11: 8.7% CAGR 1996- 06: 10.8%

CAGR(2007-11)

9%6%7%

6%

8%

8%

10%Far East

Asia & Oceania

Europe

NAM

SAM

Mid-EastAfrica

The container port industry has grown by 10.8% p.a. over the last 10 years and the trend is expected to continue as a result of globalization and higher global wealth.

Existing or emerging bottlenecks

Bottlenecks are emerging

Global utilization increases to 93% in 2011 from 79% in 2006 unless further capacity beyond known projects is added. Regional & local capacity bottlenecks will continue to emerge.

Thank You

Charleston