Use of hubs in the Container Terminal Industry

1. Use of hubs in the Container Terminal Industry Carl Jensen, Vice President APM Terminals International (Singapore Regional Office) IAPH Forum, HCMC Vietnam 2007

2. Agenda • Introduction to APM Terminals • What is a Hub? • Why use Hubs? • Different characteristics of Hub versus Import/Export terminals • Requirements for a successful Hub • Drivers for investment • Outlook and general industry trends • Q&A

3. Part of the A.P. Moller - Maersk Group

4. Rotterdam Beijing Charlotte Muscat Panama City Singapore Capetown Global offices • Regional area offices • Head office • The Hague, Netherlands 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) Europe Office (Rotterdam)

5. 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

6. Aarhus Rotterdam Tacoma Antwerp Wilhelmshaven Zeebrugge Dalian (2) Bremerhaven Le Havre Oakland Port Elizabeth Tianjin (2) Newark Constantza Genoa Yokohama Baltimore Portsmouth (2) Cagliari Los Angeles Algeciras Savannah Gioia Tauro Kobe Charleston Houston Shanghai Tangier Jacksonville Yangshan Port Said New Orleans Xiamen Port Everglades Mobile Port Qasim Kaohsiung Aqaba Yantian Miami Pipavav Nansha Salalah Kingston Mumbai Apapa Laem Chabang (2) Abidjan Onne Cai Mep Douala Colombo Tema Tanjung Pelepas Terminals Projects Itajai Buenos Aires APM Terminals’ global portfolio • 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

7. 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.

8. 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!

9. 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!

10. 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 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……..

11. 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………

12. Requirements for a successful hub • And of course, you must deliver adequate returns to investors………

13. 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!

14. 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)

15. CAGR (2007-11) 9% 6% 7% 6% 8% 8% 10% Africa Mid-East SAM NAM Asia & Oceania Europe Far East High Growth Area 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.

16. 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. Existing or emerging bottlenecks

17. Thank You Charleston