TDL Cluster Industry Trends January 2009

1. Industry Cluster Opportunity Analysis Kick-off Workshop TDL Cluster Industry Trends January 2009 ViTAL Economy Alliance Steve Martin - Steve_Martin@InterVISTAS.us Rob Beynon - Rob_Beynon@InterVISTAS.com

2. Trade and the Global Economy Trade as a % of World GDP International Trade Total The proportion of the world economy related to trade has steadily increased in recent years. Trade drives much of freight transportation Source – World Bank.

3. Growth of freight ton-miles Freight ton-miles is a standard measure for comparing scale of activity. This index shows relative growth not total tons.

4. Since the 1980s, Rail Rates Dropped(after adjustment for inflation) • While rail rates are generally lower, they increased in the last decade.

5. Inland Marine Transport Remains Important and Extensive

6. Panama Canal Expansion Panama Canal expansion will allow larger container ships to reach US Gulf ports from Asia, increasing the potential importance of Mississippi waterways.

7. Container Ships Keep Growing

8. Connect SIReadiness Assessment

9. Logistics, Transportation & Distribution: Overview • Globalization and the Ten Flatteners open substantial doorways • Trends to watch for include: • Logistics and transportation is an exploding global market opportunity due to shifts in supply-chain management • Work has begun on doubling the capacity of the Panama Canal — this $5.5B project will provide access to wider ships to the East Coast and Texas/Louisiana harbors to feed the Trans-Mexican-Canadian superhighway with Chinese goods • Due to capacity constraints, security risks and weather vulnerability at North American coastal ports, trans-loading/intermodal facilities enable the effective use of smaller ships via inland waterways • The NAFTA Super-highway is a venture unlike any previous highway construction project — it is actually a daisy chain of dozens of corridors and coordinated projects that are expected to stretch out for several decades, cost $100’s billions and end up radically reconfiguring not only the physical landscape of these U.S., but our political and economic landscapes as well — Kelly Taylor, 8/06 “New American” Sources: Varied (see the rest of this Section); US Department of Commerce, Menlo Worldwide, Plunkett Research, Ltd.

10. Key Transportation Trends • Transportation is one of the world's largest industries — sectors range from taxis to trucks to airplanes, trains, ships, barges, pipelines, warehouses and logistics services • In 2007, the U.S. Transportation Industry was about $400 billion • Includes for-hire and not for-hire sectors, support & repair • Transportation directly employs about 4.5 million Americans — >3% of U.S. economy • In the U.S. alone, total freight shipment volumes are expected to increase by 70% between 1998 and 2020 • Texas A&M University, analyzed traffic patterns and delays in 85 U.S. major metropolitan areas • Total annual cost of traffic congestion in these cities was $63 billion • 3.7 billion hours of traffic delay and 2.3 billion gallons of fuel consumed by delays Well-positioned rural regions have a strategic advantage in becoming a “traffic-free” hub Source: U.S Bureau of Economic Analysis, U.S. Department of Transportation

11. The World and Southern Illinois: Rail … to a North American one From a regional network … • When originally built in 1850’s, it’s goal was to connect Chicago with the Mississippi • Modern rail is truly trans-continental, triangulating major seaports SI is now the center of a rail network stretching to the Pacific, Atlantic and Gulf of Mexico

12. SI centrally located on theMississippi & Ohio River Systems Container-On-Barge via Inland Waterways • Increasing sea container numbers, lack of U.S. truckers, cost of fuel among the factors driving containers to barges • This creates SI Mississippi and Ohio River terminal opportunities • Container on barge is developing on the Mississippi (Houston-Memphis) and will expand • Barges are less expensive because a barge can move 45 full-sized sea containers • These rivers have been key transportation systems for over 300 years A ton of cargo can be moved 514 miles by barge on a gallon of fuel as compared to moving that same ton only 60 miles by truck or 202 miles by train Source: Transportation for Illinois Coalition Press Release, Investment needed in Upper Mississippi-Illinois waterway for economic growth and jobs. September 15, 2006

13. The Rhine as a Comparison • Rhine River container traffic increased from 10,000 units in 1975 to 2.3 million units in 2003 • Container barges travel as far as Switzerland • Cost-of-labor favors barge over truck; albeit somewhat slower Like the Mississippi, the Rhine stretches from ocean ports to the Continent’s interior The Swiss Rhine Container Terminal

14. SI Has Significant Aviation Infrastructure • Southern Illinois aviation infrastructure includes: • Three airports with instrument landing systems and runways over 6,000 ft • Nationally acknowledged SIU School of Transportation • Including Aviation Management and Technology • Planned new Transportation Education Centre (TEC) at Southern Illinois Airport • U.S. Transportation Command logistics specialist pool at Scott Air Force Base, an SI neighbor — major “information exhaust” opportunity SI Airports have capacity to accept large, jet aircraft & air-taxi service Two major SI airports located near interstate highway and rail junctions, create the possibility of intermodal freight Source: airnav.com

15. Transportation and warehousing continues to grow, supporting international trade Between 2004 and 2014, the U.S. economy will add half a million transportation jobs The number of distribution centers is increasing A typical center has over 200,000 square feet, part of an international chain, focused on key market sectors, and offers value-added services Distribution Centre services include: Pick & pack Consolidation Customer system order processing Returns processing Quality inspection Assembly Damaged returns management Exporting packing & order processing Bar code processing Labeling EDI services Kit assembly Sub-assembly Build to order Facility management Transportation management Warehousing & Distribution: Trade Growth Area SI is situated in the population centre of the U.S., near where FedEx and UPS both decided to establish their national hubs — Distribution is an investment opportunity Source: U.S. Department of Transportation

16. Logistics: Unmet Opportunity Growth of U.S. population for 2006 = 0.9% California, Texas, Florida contained most of the fastest growing centers in the U.S. Several centers within a day’s drive of SI included in 50 fastest-growing centers for 2000-2006 at growth rates of 12% to 98% (e.g., Red Stars) Illinois in Relationship to Nearby 50 Fastest Growing U.S. Cities Source: U.S. Census Bureau and Map Point Note: Map shows calculated 8 hour driving time from SI

17. Logistics, Transportation & Distribution: Implications • Dramatic reductions in shipping costs via containerization has enabled globalization of manufacturing • Distribution is conducted close to end markets — Southern Illinois is near the population center of the U.S. • 124 million people reachable within 12-hour drive • Distribution requires good rail and truck connections • Trade and distribution is projected to grow rapidly • Will grow rapidly in the Midwest because of its central location • Southern Illinois sits on the ultimate U.S. logistics sweet-spot, the intersection of major North-South and East-West trade routes: • Will these bypass SI or will the Region be a substantial player? • Through CN (was Canadian National Railway), SI can potentially interact with three U.S. and two Canadian coasts • SI aviation assets have the potential of serving as a niche market player within a mid-America Intermodal Logistics strategy

18. Logistics, Transportation & Distribution:Opportunities • Globalization has increased importance of transportation and logistics • SI is currently below national and state averages • CN has transformed the Illinois Central from a North-South operation to a strong East-West orientation serving three North American coasts via one railroad • SI global reach potential has significantly increased • SI has strategic geographic location especially to Eastern and Central U.S. • Distribution centers favor center-of-population location • Multimodal transport: Interstate/Rail/Barge • Opportunities: • For multimodal/transload facilities — address 10 million TEU/year East-West deficit • To attract distribution centers • Range in complexity from simple distribution, to assembly and customization • Explore niche-market opportunities for aviation assets • With the dramatic increase in the cost of fuel: • Waterborne traffic becoming increasingly more attractive • Key to keeping Illinois grains competitive in the world market • Inland waterways re-opening as a major logics solution for East-West port congestion • SI infrastructure contains HUB facilities for ALL forms of transportation and distribution