Infrastructure and Maritime Risks in South Carolina
Infrastructure and Maritime Risks in South Carolina Mark Cote Area AVP – Marine Practice © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Ground Rules As difficult as it may be, let’s try to leave politics out of this presentation Simply a review of facts, both past and present This is one person’s viewpoint, based on experience, exposure, and interviews with industry experts (I’m always willing to listen and learn). We cannot change the past, but we can learn from it “Those who do not learn from history are doomed to repeat it….”
2 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
South Carolina Specific Risks 1. 2. 3. 4. 5.
NAT CAT Global and US Economy Lack of Supportive (Regional) Infrastructure Regional Competition Current and future reduction of skilled labor pool – industry specific to SC Commerce
3 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Infrastructure Risks Natural Catastrophe (NAT CAT) Hurricanes El Nino/La Nina Influence on Hurricane Season One of the driving factors in determining the magnitude of a hurricane season is forecasting the phase of a naturally occurring climate cycle across the waters of the equatorial Pacific Ocean. The phase changes over the equatorial Pacific Ocean are known as La Nina and El Nino. A cooler-than-average phase in the equatorial Pacific is referred to as "La Nina" while a warmer-than-average phase is called "El Nino.“ 2017 was forecasted to be an El Nino year, but ended up becoming 2nd La Nina year in a row. 4 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
5 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
6 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
7 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
La Nina Years
8 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
9 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
10 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
11 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
2018 Weather Forecast We will remain in a “weak La Nina” pattern at least until early 2018, and where it goes from there remains unknown at this time. Names to Remember
12 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Infrastructure Risks Global and US Economy – Trickle Down & Long Tail Effect
13 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Infrastructure Risks Economic Risks: Right now, economy is booming, Stock Market is up, interest rates remain low, and businesses are profitable and expanding. History has shown that it can take 1 week to 1 year for an economic disaster to happen, and an average of 5-7 years for economy to return back to pre-crash levels.
14 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Dot.com Bubble
Mortgage/Banking Crisis
15 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Regional Economic Change from a Major Shock, and concept of “Drop and Rebound”
16 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Case Study: Volkswagen Microcosmic Example of a Failed Economy and Trickle Down and Long Tail Effects
17 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
18 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
19 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Total costs – Long Tail VW Out of Pocket Costs (fines, buy-backs, etc.): $30 Billion to date Stock Value Loss: $40 Billion Time to “Break-Even” post-loss: 2 years
20 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Collateral Damage – Trickle Down Main US Suppliers to VW for Diesel engine production and emissions control
Not included, but affected: Shipping companies, trucking companies, warehousing, freight forwarders, insurance carriers, VW Dealers, investors, assembly/plant workers, etc., etc., etc., etc. Throw a stone in a pond and count the ripple effect… 21 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
22 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
23 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Infrastructure Risks
(Lack) of Supportive Infrastructure Competition
24 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Leatherman Terminal
25 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
New York Times Article – April 2002
26 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Results: 2002: Charleston is 2nd busiest Port on East Coast / 4th in US 2007: Georgia and Virginia surpasses Charleston, Charleston drops to 10th in the US.
27 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
2016
28 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
What happened? Pre-Hurricane Hugo: Charleston was a big town/small city with a busy port and large Naval Base. Roads are poor – at best. Peninsula of Charleston is finite acreage. Post-Hugo saw influx of state and federal money. Charleston rebounds quickly Ravenel Bridge is built, allowing Mt. Pleasant to be a convenient suburb of Downtown Development on Peninsula north of Calhoun attracts small businesses and hotel/property development State attracts major brands in auto, aeronautics, and defense Upstate Greenville/Spartanburg development booms 526 connector is “completed” – Daniel Island begins residential development in 1996 29 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Daniel Island Southern Point - Property owned by SCPA
“Global Gateway”
30 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
31 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
32 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
“Plan B”
33 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Palmetto Railways – Will triple current capacity to move cargo by rail
34 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
http://palmettorailwaysintermodal.com
35 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Rail and Truck to Inland Ports
36 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Why is this important??
37 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Size DOES matter!
38 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
39 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
40 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
This is 526 on a typical afternoon, with an average of 7,000 trucks moving daily.
41 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Up next…. 18K TEU’s?
42 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
These new ships can carry 68.18 MILES of TEU’s 7000 TEU’s (current #) = 25.5 miles long – daily Add Tractor (30ft each) = additional 40 miles - daily (65.5) 1 intermodal train = 280 trucks (25 trains = 7000 TEU’s)
*Leatherman terminal will double current capacity (approx 14K TEU daily) 43 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Current SC Infrastructure
44 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Infrastructure Risks Personnel – the overlooked Infrastructure THE biggest threat we face is a quickly approaching lack of qualified, trained workers for critical infrastructure support jobs. Truck Drivers Warehouse Workers Railyard Engineers Tug and Barge Personnel diesel engineers mechanics Welders Etc. 45 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Trucking Lack of drivers is becoming “ACUTE” in Port Cities – Former Chairman – SC Trucking Assoc. Contributory Factors
Lack of State Support – not focused on Trucking. Majority of financial support is going to the industries the State Government convinced to start businesses here: Automotive and Aeronautics Technical Colleges – A truck driver cannot get an Associates Degree, therefore cannot qualify for tuition assistance, student loans, or GI Bill Insurance Carriers – Not enough good carriers around. Carriers offering coverage come and go like ocean tides. Insurance Requirements – Driver can obtain a CDL at 18, yet can only drive IN STATE until the age of 21 Driver 21 and over can drive Interstate. This is a problem for cities on the edges of states: Greenville/Spartanburg/Charlotte/Rock Hill where a lot of the UPSTATE suppliers to the industries HQ’S are located. INSURANCE CARRIER REQUIREMENT FOR COVERED DRIVERS: 25 YEARS OF AGE
“Why would a smart kid who had an interest in driving a truck go to school with no associates degree available, and then not be able to drive until 25? He can get an associates in Aeronautics and start earning a living immediately. That smart kid – who would have LIKED to have been a truck driver – is now lost to the trucking industry forever. Now, multiply that by a hundred kids a year for 10 years…..”
46 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Technical Colleges - Greenville Tech
47 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Trident Tech
48 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
49 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
The problem isn’t limited to trucking companies:
Ports and Terminal workers Construction Warehousing & Logistics Tug and Barge Diesel Mechanics – Vessel and Automotive Welders
50 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
MASC - Ideas for Solutions
51 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
52 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Mark Cote
AVP – Marine Charleston, SC © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Ground Rules As difficult as it may be, let’s try to leave politics out of this presentation Simply a review of facts, both past and present This is one person’s viewpoint, based on experience, exposure, and interviews with industry experts (I’m always willing to listen and learn). We cannot change the past, but we can learn from it “Those who do not learn from history are doomed to repeat it….”
2 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
South Carolina Specific Risks 1. 2. 3. 4. 5.
NAT CAT Global and US Economy Lack of Supportive (Regional) Infrastructure Regional Competition Current and future reduction of skilled labor pool – industry specific to SC Commerce
3 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Infrastructure Risks Natural Catastrophe (NAT CAT) Hurricanes El Nino/La Nina Influence on Hurricane Season One of the driving factors in determining the magnitude of a hurricane season is forecasting the phase of a naturally occurring climate cycle across the waters of the equatorial Pacific Ocean. The phase changes over the equatorial Pacific Ocean are known as La Nina and El Nino. A cooler-than-average phase in the equatorial Pacific is referred to as "La Nina" while a warmer-than-average phase is called "El Nino.“ 2017 was forecasted to be an El Nino year, but ended up becoming 2nd La Nina year in a row. 4 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
5 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
6 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
7 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
La Nina Years
8 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
9 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
10 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
11 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
2018 Weather Forecast We will remain in a “weak La Nina” pattern at least until early 2018, and where it goes from there remains unknown at this time. Names to Remember
12 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Infrastructure Risks Global and US Economy – Trickle Down & Long Tail Effect
13 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Infrastructure Risks Economic Risks: Right now, economy is booming, Stock Market is up, interest rates remain low, and businesses are profitable and expanding. History has shown that it can take 1 week to 1 year for an economic disaster to happen, and an average of 5-7 years for economy to return back to pre-crash levels.
14 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Dot.com Bubble
Mortgage/Banking Crisis
15 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Regional Economic Change from a Major Shock, and concept of “Drop and Rebound”
16 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Case Study: Volkswagen Microcosmic Example of a Failed Economy and Trickle Down and Long Tail Effects
17 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
18 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
19 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Total costs – Long Tail VW Out of Pocket Costs (fines, buy-backs, etc.): $30 Billion to date Stock Value Loss: $40 Billion Time to “Break-Even” post-loss: 2 years
20 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Collateral Damage – Trickle Down Main US Suppliers to VW for Diesel engine production and emissions control
Not included, but affected: Shipping companies, trucking companies, warehousing, freight forwarders, insurance carriers, VW Dealers, investors, assembly/plant workers, etc., etc., etc., etc. Throw a stone in a pond and count the ripple effect… 21 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
22 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
23 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Infrastructure Risks
(Lack) of Supportive Infrastructure Competition
24 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Leatherman Terminal
25 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
New York Times Article – April 2002
26 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Results: 2002: Charleston is 2nd busiest Port on East Coast / 4th in US 2007: Georgia and Virginia surpasses Charleston, Charleston drops to 10th in the US.
27 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
2016
28 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
What happened? Pre-Hurricane Hugo: Charleston was a big town/small city with a busy port and large Naval Base. Roads are poor – at best. Peninsula of Charleston is finite acreage. Post-Hugo saw influx of state and federal money. Charleston rebounds quickly Ravenel Bridge is built, allowing Mt. Pleasant to be a convenient suburb of Downtown Development on Peninsula north of Calhoun attracts small businesses and hotel/property development State attracts major brands in auto, aeronautics, and defense Upstate Greenville/Spartanburg development booms 526 connector is “completed” – Daniel Island begins residential development in 1996 29 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Daniel Island Southern Point - Property owned by SCPA
“Global Gateway”
30 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
31 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
32 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
“Plan B”
33 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Palmetto Railways – Will triple current capacity to move cargo by rail
34 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
http://palmettorailwaysintermodal.com
35 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Rail and Truck to Inland Ports
36 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Why is this important??
37 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Size DOES matter!
38 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
39 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
40 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
This is 526 on a typical afternoon, with an average of 7,000 trucks moving daily.
41 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Up next…. 18K TEU’s?
42 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
These new ships can carry 68.18 MILES of TEU’s 7000 TEU’s (current #) = 25.5 miles long – daily Add Tractor (30ft each) = additional 40 miles - daily (65.5) 1 intermodal train = 280 trucks (25 trains = 7000 TEU’s)
*Leatherman terminal will double current capacity (approx 14K TEU daily) 43 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Current SC Infrastructure
44 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Infrastructure Risks Personnel – the overlooked Infrastructure THE biggest threat we face is a quickly approaching lack of qualified, trained workers for critical infrastructure support jobs. Truck Drivers Warehouse Workers Railyard Engineers Tug and Barge Personnel diesel engineers mechanics Welders Etc. 45 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Trucking Lack of drivers is becoming “ACUTE” in Port Cities – Former Chairman – SC Trucking Assoc. Contributory Factors
Lack of State Support – not focused on Trucking. Majority of financial support is going to the industries the State Government convinced to start businesses here: Automotive and Aeronautics Technical Colleges – A truck driver cannot get an Associates Degree, therefore cannot qualify for tuition assistance, student loans, or GI Bill Insurance Carriers – Not enough good carriers around. Carriers offering coverage come and go like ocean tides. Insurance Requirements – Driver can obtain a CDL at 18, yet can only drive IN STATE until the age of 21 Driver 21 and over can drive Interstate. This is a problem for cities on the edges of states: Greenville/Spartanburg/Charlotte/Rock Hill where a lot of the UPSTATE suppliers to the industries HQ’S are located. INSURANCE CARRIER REQUIREMENT FOR COVERED DRIVERS: 25 YEARS OF AGE
“Why would a smart kid who had an interest in driving a truck go to school with no associates degree available, and then not be able to drive until 25? He can get an associates in Aeronautics and start earning a living immediately. That smart kid – who would have LIKED to have been a truck driver – is now lost to the trucking industry forever. Now, multiply that by a hundred kids a year for 10 years…..”
46 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Technical Colleges - Greenville Tech
47 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Trident Tech
48 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
49 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
The problem isn’t limited to trucking companies:
Ports and Terminal workers Construction Warehousing & Logistics Tug and Barge Diesel Mechanics – Vessel and Automotive Welders
50 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
MASC - Ideas for Solutions
51 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
52 © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
Mark Cote
AVP – Marine Charleston, SC © 2017 ARTHUR J. GALLAGHER & CO. | AJG.COM
