mm.fall19.presentation.vt-management.pptx

security awareness

1. Port, Vessel, Terminal Management 08:30 – 08:45 Introduction and Revue of last week 08:45 – 09:35 Port Authority - the great facilitator 09:35 – 09:45 Break 09:45 – 10:50 Steamship lines - a rapidly evolving industry 10:50 – 11:00 Break 11:00 – 12:00 Marine Terminal Operators, organization and function 12:00 – 12:10 Break 12:10 – 12:30 Exercise – how will the Port handle peak season

2. Port Authorities Generating revenue, Cargo Growth and Jobs! A port authority (or a port district) is a governmental or quasi-governmental public entity usually formed by a legislative body to operate ports and other transportation infrastructure. They may be state agencies (example: Georgia Port Authority), extensions of municipal governments (example: Port of Los Angeles part od the city) or special purpose municipalities upon themselves (example: Port of Tacoma). Port authorities are usually governed by boards or commissions, which are commonly appointed, but may be elected. Those commissions hire a CEO to run the day to day activities of the port. Some power is given to the CEO to authorize spending but most spending, capital investments, must be approved by the commission.

3. Port Authorities and Stakeholders There are many Stakeholders that intersect with the Port. Each Stakeholder has their own point of view and objective. The Port must balance the needs and wants of stakeholders with the mission and goals the Port has set. The Port must communicate its path effectively to all the stakeholders in order to grow cargo, increase jobs, protect the environment and be a good neighbor!

4. Types of Ports: The Operating Port • Builds the wharves, owns the cranes and cargo-handling equipment and hires the labor to move cargo in the sheds and yards. A stevedore company hires longshore labor to lift cargo between the ship and the dock, where the port’s laborers pick it up and bring it to the storage site. The Port receives direct bennifts of cargo volume growth.

5. The Landlord Port • The powers of the port authority are limited to the decisions concerning land use, reservations of space for the port areas and construction and use of public port works. Port authorities act like the owner of the port property, granting short or long term leases or concessions to private enterprises. Revenue is generated on a per acre rental rate. The port is protected from the ups and downs of cargo volume but has less influence and does not benefit from increases of cargo volume.

6. The Hybrid Port • Ex. Port of Tacoma – facilitate cranes at some terminals (Husky), leases other terminals (WUT) and act as an operator (T7) • The port authority runs one or more terminals while leasing others or can act as a tool port in one instance and as a landlord or operating port at other facilities

7. The Northwest Seaport Alliance a) The Northwest Seaport Alliance “The Northwest Seaport Alliance is a marine cargo operating partnership of the Port of Seattle and Port of Tacoma. We are the fourth-largest container gateway in North America. Under a port development authority, the ports manage the container, breakbulk, auto and some bulk terminals in the Seattle and Tacoma harbor https://www.nwseaportalliance.com/#/maps/overview

8. How Does the Money Flow? It all starts with the cargo owner and the steamship line. Freight rates are negotiated to carry cargo from origin to destination. Sometimes it is from Port to Port. Sometimes it is from Door to Door. Whatever this rate is represents the revenue for the Line. Everything else is an expense.

9. Steamship Line to Stevedore A steamship line agrees to a per box rate with the Stevedore to load and discharge their vessels.

10. Stevedore to Port The Stevedore either pays an amount that is stipulated in the Port Tarif for the use of the dock or enter into a long term lease of the facility through a concession.

11. NWSA Tariff 300 Naming: Rates, Charges, Rules and Regulations for Services Performed by the Participating Terminals, Docks, or Wharves under the Northwest Seaport Alliance, as licensee/agent for Ports of Tacoma and Seattle https://www.nwseaportalliance.com/sites/default/files/2017_drayage_providers_company_profile/July%201,%202017%20Tariff.pdf

12. What is a Concessionary Agreement A concession is an agreement between the port authority and a steamship line or a terminal operator to operate certain facilities within a port (for example a terminal) during a given period of time (20+ years). The shipping lines pay the terminal operators certain handling tariffs or enter into ship line agreements with the terminal operator. With that income, the terminal operator must cover his operating costs, investment costs (in some concession models the terminal operator must actually invest in infrastructure), taxes and charges

13. Concessionary agreement Revenue. Payments to the port authority take two basic forms: Fixed Fee: The lease charge is a fixed fee (ground lease), price per acre. There are usually other stipulations to incentivize additional cargo growth and to account for yearly inflation. Minimum Annual Guarantee (MAG): Often the terminal operator is also required to guarantee a minimum throughput of cargo expressed on an annual basis

14. Port Authority and Maritime supply chain stakeholders a) Trucking Companies b) Railroads c) Distribution Centers d) Labor e) Steam ship Line f) Environmental groups g) Stevedore companies h) Residential Neighborhoods i ) Tribal Land j) non maritime tenants k) shippers l) BCO’s

15. BREAK!

16. Ocean Carriers The ocean carriers own (or charter) and operate the ships that call at the ports. Own to lease generally around 50% +/- 10. Diesel-fueled vessels have replaced the old steamships of the past, although many people still refer to modern diesel ships as steamships. Ocean carriers often own, or have a strategic relationship with a Terminal Operator in order to secure guaranteed berth space at a port or in order to vertically integrate their business.

17. Fact Historically, a "ship" was a sailing vessel with at least three square-rigged masts.

18. Top 10 shipping Lines 1 APM-Maersk 4,198,033 17.90% 2 Mediterranean Shg Co 3,642,170 15.50% 3 COSCO Group 2,968,344 12.70% 4 CMA CGM Group 2,680,927 11.40% 5 Hapag-Lloyd 1,681,915 7.20% 6 ONE (Ocean Network Express) 1,581,001 6.70% 7 Evergreen Line 1,296,932 5.50% 8 Yang Ming Marine Transport Corp. 645,887 2.80% 9 PIL (Pacific Int. Line) 393,498 1.70% 10 Hyundai M.M. 385,566 1.60% Top 10 = 83% of all capacity!

19. Commercial Landscape 2000 - 2018 2000 - 2007 Industry is preparing for a tsunami of trade. PPP is solution to infrastructure challenges. The West Coast Rules, East coast secondary. Individual Lines are hunting for acreages (waterfront) and concessionary agreements. The word on the street is that LA / Long beach are running out of space. Steamship lines looking north for added capacity Growth rate -double digits - year on year for the past 15 years. Attitude is you can’t loose. Terminals are money making machines. Steamships are racking up significant profits, looking to gain market share

20. Commercial Landscape 2000 - 2017 2007 - 2010 US economy hits the skids 2007- 2008. 2007 - 2009, Severe vessel TEU overcapacity do to lack of demand. Idling of ~12% of global fleet. Economy in freefall. Slow- and ECO steaming instituted to soak up excess capacity. Industry in shock. General belief that some will go bankrupt. Large scale bailouts and support from governments save some steamship lines.

21. 2010- 2011 Some lines return to profitability . Massive cost cutting by the lines, reduction in customer service. Feb of 2011 Maersk announces order for 20 triple E. 18,000 teu . Other shipping lines follow suite and the race to the big ship is on. Market share increase is the name of the game. At the cost of rates. Market begins consolidating. Alliances begin to form. Lines looking to dominate are just stay alive. Commercial Landscape 2000 - 2017

22. Commercial Landscape 2000 - 2017 2011 -2015 Huge injection of larger, 18,000teu vessels. 2014 and Q1 2015, West Coast Labor issues. 2016 Port of Portland shuts down only container terminal. Overcapacity creates massive rate volatility. Hanjin declares bankruptcy.

23. Commercial Landscape 2000 - 2017 2017 April – New set of alliances are formed shrinking from 4 to 3.

24. Alliances both the old and the new Previous shipping alliances : 2M Alliance : Maersk and MSC Ocean Three Alliance : CMA CGM, UASC, China Shipping G6 Alliance : NYK Line, OOCL, APL, MOL, Hapag -Lloyd, HMM CKYHE Alliance : K Line, COSCO, Hanjin Shipping, Evergreen, Yang Ming

25. The New Alliances New shipping alliances 2M Alliance :  Maersk, MSC THE Alliance :  NYK, MOL, K Line , Yang Ming, Hapag-Lloyd Ocean Alliance :  CMA CGM, Evergreen, OOCL, COSCO Shipping NYK,MOL,K LINE have merged into new company ONE. COSCO now owns OOCL. April 2020 HMM will join THE Alliance.

26. Incredible control of market These three alliances represent 77.2% of global container capacity and a whopping 96% of all East-West trades.  Ocean Alliance offers the most services, with some 40 loops. THE Alliance follows with 32 services and 2M with 25. 2020 will see the Alliance add additional services with the inclusion of HMM. M2 will loose a few services as they end the sharing agreement with HMM.

27. The Big Three

28. Where to from Here? More big ships. More consolidation. More power in the hands of the steamship lines. Increased focus on technology as a means to cut costs and increase supply chain visibility. Pushing the digitization of the logistics supply chain. Asset tracking, Block chain, cloud computing. Fending off disrupters like Amazon, Alibaba and a host of start up ventures hoping to penetrate the market.

29. BREAK

30. Marine Terminal Operators The marine terminal operator (MTO) is the party that operates cargo handling activities at a port and husbandry of ships A terminal operator oversees unloading cargo from ship to dock, checking the quantity of cargoes versus the ship’s manifest (list of goods), transferring of the cargo into storage areas, checking documents that authorize a trucker to pick up cargo, overseeing the loading/unloading of railroad cars, etc. In addition, the terminal operators conducts Maintenance and Repair work on behalf of the Lines (containers, refrigerated containers, gensets ) and chassis providers.

31. Marine Terminal Operators Business Models Model 1: T-18 MTO Operates a particular facility (terminal) as a common user facility The terminal operator will equip the facility (cranes and yard equipment) Their business model is to have several ocean carriers call – however each caller cannot be granted the same level of berth guarantee so Service Level agreements are signed with an ocean carrier This establishes an expected volume and in return the ocean carrier has berth guarantee and service level issues (crane productivity, number of cranes per vessel etc. Penalty clauses in the operating agreement - also works in reverse Therefore there is a balance for the caller: berth guarantee vs. additional costs (generally berth guarantee will be more costly)

32. Marine Terminal Operators Business Models Model 2. Ocean Carriers holding the concessionary agreement – two subgroups. The ocean carrier operates the terminal through a subsidiary. The ocean carrier secures continuous flow of cargo by leasing a terminal from a port authority. The ocean carrier is the lessee but contracts the stevedoring to an independent terminal operator. THE ONE at Husky pays the rent to Port of Tacoma but Ports of America operate the terminal on their behalf.

33. Marine Terminal Operators Business Models Model 3. Operating Port Authorities Virginia Port Authority, North Carolina State Docks, South Carolina State Port, Georgia Port Authority and Alabama State Docks (essentially the Southeastern Ports) Have an operating branch that operates the port’s facilities Generally they also make the recommendations for equipment purchase to the Port’s Director who, in turn, would act after approval from the Commissioners

34. Steamship Line has their own Terminal operator. Model 4: Stevedoring company is a subsidiary of the Steamship Line. Everports APM Allows the most control and flexibility to the Line as it is their asset.

35. Biggest operators

36. Looking at terminal Operations Pierce County Terminal Departments and Staffing The Ins and outs of running a terminal Understanding equipment and modes of operation

37. Who is Running the Operation Management Staff GM TSM - TOM Marine Manager – Yard Manager –Gate Manager – Rail Manager Superintendents

38. Who is getting the work done. Represented Staff - ILWU Chief supervisor Steady Forman Supervisors Equipment operators Extra men. For vessel operations add a supercargo and additional foreman for each working gang.

39. Straddle carrier facility

40. Top Pick RTG Facility

41. ASC Facility

42. Increasing production - Controlling costs Terminals have a design capacity and a design production rate. Increasing production can be accomplished in several ways. Infrastructure projects that add acreage. Increase the hours of operation. Introduce new technology that increases productivity. Add equipment and manning to increase the amount of containers per hour that can be processed.

43. BREAK IF WE HAVE TIME

44. What does the future hold? Mechanical Automation. Robotics. ASC’s AI, Machine Learning, Autonomous container handling equipment. Bigger ships, fewer calls, more peak congestion. Blockchain 5G 24/7 asset Tracking IOT New players backed by venture capital. Uber Freight, NEXT Trucking, convoy, NYSHEX, etc.

45. 45

46. Port Congestion A Multi-Faceted Issue Inefficiency of the transportation infrastructure connecting a marine terminal to rail and roadways Disruptions to intermodal rail networks that serve ports The amount of land that the port facility has to store containers and conduct operations Hours of marine terminal operation The time chosen by shippers or truckers to pick up their shipments Hours when warehouses or distribution centers are open to receive or discharge containers

47. Group exercise Peak season is here and BCO’s are voicing concerns that they will not be able to get their cargo in a timely fashion. What should we do?

48. Group exercise Develop a strategy based on these inputs. The Port does not have operational control. Cargo owners say they will shift cargo away from the gateway if production suffers at the terminals. Loss of market share may not be recoverable. Terminal operators can’t afford additional cost to their operations. Hint: There is no easy answer to this question. 