1. Martin Associates 2938 Columbia Ave., Suite 602 Lancaster, PA 17603
Trends in International Trade and Logistics and Implications for the Future Role of Indiana
September 16, 2003
Indianapolis, IN
Martin Associates
2938 Columbia Ave., Suite 602
Lancaster, PA 17603

2. International Trade Has Been a Growing Sector of the US Economy
Value of Trade in Goods

3. Trade in Goods is an Increasing Share of US GDP
13.3%
15.5%
18.1%
20.2%
18.4%

4. Exports from Indiana Have Shown Strong Growth in the 1990’s -- 13th in Terms of Growth in State Exports and Nearly 8% of GSP

5. 2001 Bureau of Transportation Statistics
Ships and Barges Transported the Majority of the US Trade in Terms of Value
2001 Bureau of Transportation Statistics

6. 2001 Bureau of Transportation Statistics
Ships and Barges Transported More than Three-Quarters of the US Trade in Terms of Tonnage
2001 Bureau of Transportation Statistics

7. The Marine Transportation System is Critical to the Country’s Economic Growth
Deepwater Ports and Ocean Transportation, including the Saint Lawrence Seaway
Great Lakes Transportation System
Inland Waterways

8. The MTS Handled 2.3 billion Tons of Cargo in 1999

9. In Addition to Cargo Transportation, the MTS Also Consists of:
168 Ferry Systems operating in the US
Commercial Fisheries million tons of fish landed at US ports in 1999
Travel and Leisure – 8.3 million passengers boarded cruise vessels at US port facilities

10. The Marine Transportation System is Vital to the US Economy
2.5 million jobs directly or indirectly supported by the MTS
4.9 million jobs in the US supported by the production of the products exported via the MTS
These 7.4 million jobs account for nearly 6% of US jobs

11. Impact of International Trade Transported by the MTS
1.1 million total direct, induced and indirect jobs
$44 billion of direct, induced and indirect personal income
$56 billion of direct transportation services revenue
$11.1 billion of Federal taxes
$5.1 billion of state and local taxes

12. The MTS Moved $182 Billion of Export Product to Foreign Markets
4.9 million Americans are employed in the production of the exports:
840,000 jobs in the agricultural sector
757,000 jobs in the electronics manufacturing sector
620,000 jobs with automobile production sector

13. The Value of the Inland Waterway System
12,000 mile network of navigable waterways in the US with a replacement value of $125 billion
51% of nation’s oil refineries located along the inland waterways

14. The Value of the Inland Waterway System
States bordering the Mississippi, Illinois, Ohio, and Missouri River System are responsible for:
82% of the nation’s corn
77% of the soybeans
32% of the wheat

15. The Inland Waterway System Provides a Cost Effective and Environmentally Friendly Alternative to Surface Transportation

16. Implication #1: The efficient performance of the MTS is critical for the future competitive position of the US and the State of Indiana in international trade. However, both structural and non-structural constraints could impact future performance.

17. Structural Constraints/Issues -- Deepwater Ports
Channel Depth
Post Panamax ships require depth of 45 ft. or greater
Only 7 of the nation’s deepwater ports have channel depths in excess of 45 feet
Capital investments are needed to provide deeper harbors
Maintenance dredging is a key expense

18. Existing Channel Depths
Source: JWD

19. Terminal Infrastructure is Strained
Terminal capacity constraints appear with growing demand % annual growth in trade, particularly in the West Coast/Southern California port range:
Productivity gains less than in US manufacturing
Low density utilization of US container ports, inefficient use of scarce land
Capacity issues at container terminals exacerbate productivity
Technology adaptations will eventually lead to better capacity utilization

20. The US Lags in Terminal Densification
Source: JWD

21. Structural Constraints/Issues -Inland Waterways
Small size of locks increases congestion, in turn impacting transit times and carrying costs
15% of locks are 1,000-1,200 ft. long
60% are ft. long
25% are less than 600 ft. long

22. Structural Constraints/Issues -Inland Waterways
1,200 ft. lock can accommodate 17 barge tow compared to 8 barge tow for 600 ft. lock
Majority of tows on Mississippi are 12 barge tows -- tows must be split to navigate smaller locks
50% of the locks are 50 years of age or older

23. Structural Constraints/Issues -Inland Waterways
National Corn Growers Association reports lock delays on the Upper Miss. cost farmers $94 million per year in the mid 1990’s
2020 losses could amount to $384 million annually if locks are not replaced

24. Non-Structural Constraints/Issues - Security
Security costs competing for infrastructure funding:
Optimal level of inspections and security measures -- commercial vs. security trade-off’s

25. Non-Structural Constraints/Issues - Security
Impact on logistics strategies:
Increasing inventories -- costly
Impact on distribution strategies -- decentralization vs. centralization
Supply chain interruptions -- plant closures
Increased dependence on domestic sourcing -- infrastructure of waterways, highway and rail are key!

26. Non-Structural Constraints/Issues -- Labor Issues and West Coast Work Stoppage
Labor work stoppages/slowdowns have increased in frequency in last 2-3 years:
Most pronounced -- West Coast Dock Shutdown and work slowdowns --Taft-Hartley outcome

27. The West Coast Port Shutdown, September 29, 2002 -- 11 days
Vessels delayed about 25 days on average
Lost one full rotation
Daily cost $15,000-$40,000 per ship
3 key carriers reported $30 million loss
Marine terminals
Lost wages for hourly workers --11 days
Fixed operating costs of terminals continued
Productivity reduced for 5-7 weeks
Railroads did not accept bulk cargoes

28. The West Coast Port Shutdown
Trucking
Turn times more than tripled for 5-7 week period
Truck turns per driver reduced to 1 per day -- lost income and withdrawal from industry
Freight consolidators
Closed during shutdown
Need for additional space -- remote storage, increased drayage, inventory carrying costs increase

29. The West Coast Port Shutdown Railroads
Intermodal and bulk trains serving West Coast halted during shutdown:
equipment demurrage charges
shortages of equipment
domestic repositioning issues
Need to find siding for 150 miles of trains during 11 day period
Locomotives not allocated properly
Quota system established by railroads after re- opening to allocate rail cars to ports
One railroad reported a $4-$5 million loss during shutdown

30. The West Coast Port Shutdown Importers/Exporters
11 days shutdown resulted in 3-4 weeks of delay in products:
Lost sales -- 10%-15% of imports lost during shutdown
Inventory carrying costs
Use of air cargo (10% of shoes, apparel, toys and electronics) times ocean freight rate levels
Diversion to East Coast for 2% of daily imports at 50% increase in costs

31. The West Coast Port Shutdown Importers/Exporters
Retail sectors hardest hit:
Apparel
Toys
Electronics
Auto industry suffered key impacts in terms of plant closings:
NUMMI in Fremont, CA
Honda in Lincoln, AL
Mitsubishi in Illinois

32. The West Coast Port Shutdown Importers/Exporters
Shutdown resulted in 5% market share loss for US grain exports ($135 million loss)
Banana importers lost more than $1 million in banana sales due to spoilage
Meat exporters incurred increased refrigeration and storage costs

33. The West Coast Port Shutdown, September 29, 2002 -- 11 days In summary
5-7 weeks of follow-on impacts
$15.6 billion cost to the economy
20,147 full-time jobs lost

34. Implications
Specific investments in infrastructure and technology are required to just maintain the MTS.
Improvements in efficiency of the system are necessary to position the MTS for its growing role in international and domestic trade.
Exporters and importers must develop contingency plans to deal with security issues and labor uncertainties.

35. The Ports of Indiana are Well Positioned to Participate and be a Leader in the Marine Transportation System
The Port of Burns Harbor provides a gateway for:
International cargo
Trans-lake cargo
Domestic cargo

36. The Ports of Indiana are Well Positioned to Participate and be a Leader in the Marine Transportation System
The river ports at Southwind and Clark Maritime Center provide low cost transportation for steel (domestic and international), coal, grains, other raw materials

37. The Ports of Indiana are Well Positioned
The Indiana Ports System can provide valuable transportation logistics services to improve the competitive position of Indiana in international trade

38. The Ports of Indiana are Well Positioned
Potential to move trucks off congested highways:
Ferry services on the Lakes
Synergy between the river system ports and Burns Harbor could provide alternatives to truck and rail transportation

39. Immediate Constraints/Issues Facing the Indiana Ports System
Limited draft on the Seaway
9 month shipping season
Competition with coastal ranges and rail infrastructure -- capitalize on intermodal opportunities to compliment marine system
Dependence on the steel industry at Burns Harbor to drive international trade -- Diversify maritime markets
Conflict between international transportation and logistics interests and the domestic steel industry – Section 201 Steel Tariffs.