Harris County: Recipient of Global Trends in Manufacturing and Transportation

1. Harris County:Recipient of Global Trends in Manufacturing and Transportation By: Curtis D. Spencer, President IMS Worldwide, Inc.

2. Table of Contents • Global Trends 2014-2019 • Manufacturing and Re-shoring • Gulf Coast Resin Boom • Other Harris County Trends www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

3. Global Trends www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

4. Five-Year Forecast for U.S. Imports via Ocean Container Compound Annual Growth Rates Forecast developed by JOC Group economist Mario O. Moreno

5. Five-Year U.S. Exports via Ocean Container Compound Annual Growth Rates Forecast developed by JOC Group economist Mario O. Moreno 3.5% With New Resin Exports

6. U.S. Intermodal Volume Growth In the first 37 Weeks of 2013 vs. 2014 5.6% Growth Source: American Association of Railroads

11. Global Sourcing and Manufacturing Trends: Re-Shoring and New US Manufacturing www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

12. Manufacturing Grows in the USA • New US-Domestic manufacturing that is made competitive by new resources • Natural Gas-new technologies unlocking new sources of product which provides lower cost feed stocks for plastics-PE and PP specifically but PVC as well, now US is competitive with the worlds producer • New production capacity announced in North America, 9 billion pounds of new production through 2018, some will be on line as early as 2015 • Not all about “re-shoring” but about new industry and manufacturing www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

13. What is the Real Story in Near Shoring • Boston Consulting Group’s report in 2012 had everyone expecting “25% Re-Shoring to the USA in the next 5 years” Not going to happen! • There are indeed some evidence of Re-Shoring coming back into the USA from Asia. Primarily in heavier products/parts, highly automated operations and those requiring quick engineering changes in order to stay ahead of competition • AND…we are seeing a huge ‘boom’ in basic, heavy manufacturing being started up in the USA-plastics, chemicals, steel, basic metals – all based around Cheap Natural Gas for the next 100 years. www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

14. What is the Real Story in Near Shoring • New Aluminum Plants, New Steel Plants, New Pipe Plants and basic Chemical Plants are all coming online during the next 5 years in the USA • How? Cheap Natural Gas. • And, we are seeing a resurgence in Mexican Manufacturing in auto, home goods and other “heavy products” for US consumption. www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

15. Chemical, Resin and Plastics MFG. • 191 new or expansions in petrochemical processing • This is $117 billion in the US petrochemical industry • By 2020, the cumulative impact will boost real GDP by 2.0% to 3.3% • Creating from 2.7 million to as high as 3.6 million new jobs. • Representing cumulative capital investments totaling $117.0 billion in the United States, fully 62% of this is foreign direct investment. • 62% of this investment is foreign direct investment Source: American Chemical Council, 2014

21. Strong Investment in Ethylene

22. Exporting Plastic Resins • In 2012, 15 billion pounds of thermoplastic resins was exported, PVC was the leading export with a value of $31.2 billion. • Between 2005 and 2012, the U.S. went from being among the highest cost producers of ethylene to among the lowest cost producers globally. • Today, the U.S. exports approximately 20% of its production of PE and PP resins. • When all the new capacity is created, we will export -30%-40% of the total PE and PP Production. • What Supply Chain Routes will be utilized to Export Resin? www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

23. Supply Chain Routes for Plastics • In the next 10 years, the Gulf Coast Producers will be needing 350,000 to 400,000 new export containers to capture the new Export Production. (Source: IHS Global Insights 2014) • Estimates today place 60% of that Resin will be shipped directly out of the Port of Houston to Asia, Europe and S. America • 15-20% may travel to DFW for packaging and then will route to West Coast Ports and on to Asia. • 10-15% will travel to Charleston/Norfolk for European Destinations. www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

24. Global Sourcing and Manufacturing Trends - Mexico www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

25. Here is a look at the Evidence for Mexico! www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

26. www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

27. Since 2003, wages in Mexico have risen 25% compared to 218% in China U.S. Dollar 2011-2013 WSJ SOURCE: International Labour Organization, U.S. Bureau of Labor Statistics www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

28. What do we see as the “Hottest Markets” not on everyone’s radar • Houston Gulf Coast – Resin, Medical, Manufacturing; Insane levels of investment over the next 10 years. • E-Com facilities in dense population clusters; re-working value added space, cold, cooler, reefer space, for E-Com same-day delivery. • The entire “cold-chain” is growing! Target, WM and others want to control back to the farms. Port of Houston has a huge initiative for Cold-Chain Imports and exports. • Our Firm is working on projects estimated to add over 80,000 New TEUs for the Port of Houston – Export, and 50,000 new TEUs Imported. www.imsw.com Foreign Trade Zone, Logistics and Supply Chain Consulting

30. Change in Employment (%) Top 20 Metro’s July 2013 – July 2014 Source: HSBC and Greater Houston Partnership

33. QUESTIONS? Prepared By: Curtis D. Spencer, President IMS Worldwide, Inc.