East West Freight Corridor Trends 29 May 2014 FLC WA THA1

Study aim To test the thesis that east-west Australian freight volumes and growth rates are being reduced by an increase in north-south freight into WA THA FLC WA2

Study Approach Review of available data on east-west corridor freight Examination of observed new supply chain behaviour in retail logistics sector Suggestions for improved freight analysis THA FLC WA3

Available data National data sources including BITRE, ABS Rail data from network operator Sea freight data from BITRE, port authorities THA FLC WA4

BITRE 2010 Interstate Freight in Australia estimated freight on interstate corridors disaggregated into separate modes forecasts freight to 2030 THA FLC WA5

East West Freight Task tonne kilometres THA FLC WA6

East West Freight Task estimated and forecast growth rates THA FLC WA7

East West Rail Freight Task Brookfield can supply high level rail data Gross tonne kilometres and train counts Otherwise data confidential to customers No data available on the nature of the freight THA FLC WA8

East West Rail Freight Task THA FLC WA9

Sea Freight Data BITRE annual summary of Australian Sea Freight and port activity Aggregated data, difficult to separate bulk from general freight Container freight limited to containers carried under coastal voyage permits THA FLC WA10

Available data limitations Some national time series data (ABS, BITRE etc) available but highly aggregated and questionable Often rely on industry surveys Forecasts usually based on statistical techniques rather than underlying analysis of freight generating activity Lack of good modal data at industry segment level (retail, manufacturing, food etc) Understanding container freight made complicated by large empty container volumes THA FLC WA11

East-west freight understanding East-west volumes have grown strongly since 1970s Rail dominates land transport, but coastal sea freight significant Volatile bulk minerals freight movements (especially by sea) can disguise trends in general freight (household and manufacturing) THA FLC WA12

Container Freight into Fremantle Trade data accumulated into broad industrial groupings for last 10 years Full International imports 272,000 TEU, growing 9% per year to 2013 Full Coastal ‘imports’ 56,000 growing at 3.5% 2014 volumes estimated from ytd April THA FLC WA13

Import Freight by country of origin (TEU) THA FLC WA14

Chinese imports growing THA FLC WA15 High growth, especially in household goods

Australian imports static THA FLC WA16 Trade fairly steady in recent years over a variety of commodities

East West Freight - best available estimates THA FLC WA17 Best estimates suggest modal split: 7% sea, 62% rail, 31% road Data woefully inadequate to identify trends in general freight

Retail Supply Chain Trends Two sectors: – Supermarkets and grocery – Consumer goods Supermarket sector highly concentrated, Coles and Woolworths controlling 73% sales (est 12k TEU pa) Consumer sector relies more heavily on imports and is much more disaggregated (est 60k TEU pa) Source THA,IBIS World G4111 THA FLC WA18

Retail Study 1 – Kmart (Sydney) Example of increased dependence on imports affecting supply chain 50,000sqm warehouse opened Eastern Creek 2003 Receiving point for all NSW supplies Handles 400 TEU per week Large container storage space – long supply chain Low value high volume product WA supplied direct from overseas to local DC No significant interstate movements THA FLC WA19

Retail Study 2 - Target National Melbourne centred distribution model to 2013 Replaced with regional DC model, increased imports, potential for streamlining Malaysian hub packs store-specific containers from various Asian sources Also imports from China and Bangladesh direct into Fremantle Reduction in east-west freight movement CTI Logistics facility growing from 2000sqm to 30,000sqm in 5 years THA FLC WA20

Target chain realignment THA FLC WA21

Retail study 3 – Supermarket Supply Chains Woolworths and Coles (73%) have large DC’s near airport More local product than consumer goods Private labels imported and increasing (28%) Aldi (10%) opening DC at Jandakot Higher level of private label (imported) product IGA, part of Metcash group (hardware, liquor,automotive) IGA have DCs but large proportion product delivered direct to store by supplier THA FLC WA22

National Retail chain models Major retailers migrating to new large DCs in logistics precincts in most cities, consolidating smaller warehouses Greater reliance on imports, especially in consumer goods National distribution models (based in Sydney and Melbourne) being replace by regional distribution by some major retailers THA FLC WA23

Supply Chain Findings Significant reorientation around Asian supply networks for some if not all retailers Scale of Perth warrants move away from east coast DC model Potential significant impact on land use in Forrestfield/ Hazlemere Volumes small in overall east-west context but growing THA FLC WA24

Freight data and analysis improvements Seek systematic disaggregated data from Brookfield Rail and rail operators Engage with major rail freight forwarders to understand their customer bases and design a qualitative long term survey re rail usage Use Fremantle Ports database to design a regular reporting protocol on containerised commodities Seek engagement with local retail sector to understand import v domestic supplier reliance THA FLC WA25