Assessing the Impact of the Panama Canal Expansion | Global Trade Magazine
U.S. Ports
  July 7th, 2016 | Written by

Assessing the Impact of the Panama Canal Expansion

Some U.S. Ports Prep for a Boom – But Will it Happen?

Sharelines

  • South Carolina will invest $700 million in port-related infrastructure projects, on top of $1.3 billion in federal aid.
  • The Port of Miami spent $43 million on four super-sized cranes to handle cargo from larger ships.
  • In New York and New Jersey, the Bayonne Bridge is being raised to allow bigger ships to pass through.

Every day is an eventful day at Port Manatee in southwest Florida. As the closest U.S. deepwater

seaport to the Panama Canal, this is the landing point for tropical fruits harvested on exotic islands, bound for your neighborhood grocery store. Steel and cement are imported here as well, while outgoing cargo ships carry everything from power generation units to used cars.

But Matty Appice, Port Manatee’s chief commercial officer, believes his busy days are about to get a lot busier.

Appice was among the dignitaries from around the world who attended the June 26 ceremonies marking the completion of the Panama Canal expansion, a $5.25 billion effort launched in 2007. The project added a third set of locks, while widening and deepening existing infrastructure. By doubling its cargo throughput capacity, the canal is now able to handle ships with a capacity of 12,000 to 13,000 twenty-foot equivalent units (TEU)–up from the previous limit of 5,000 TEU.

As a result, Appice expects cargo volume through Port Manatee to more than double over the next ten years. And he is not alone in his optimism. Eastern ports in Baltimore, Miami, Jacksonville, and Charleston are in the midst of multimillion-dollar expansion to increase their harbor capacity.

Currently, only the Port of Virginia at Norfolk can handle ships the size of those that are now able to travel through the expanded Panama Canal. But that won’t be the case for long.

Over the next decade South Carolina will invest $700 million in port-related infrastructure projects, on top of $1.3 billion in federal aid. The Port of Miami spent $43 million on four super-sized cranes to handle cargo from larger ships, while in New York and New Jersey, the Bayonne Bridge is being raised from 151 feet above the water to 215 feet, to allow bigger ships to pass through Port Newark and other local ports.

However, some industry observers believe all this boom talk may be unrealistic. Jean-Paul Rodrigue, professor of global studies and geography at Hofstra University, advises not to expect a miracle from the expansion: “The health of the economy is more important than the size of the ports when it comes to benefits from shipping trade,” Rodrigue said.

Ed Sands, global practice leader at the transportation procurement firm Procurian, also thinks such rosy predictions are premature, since places like Florida “don’t have the distribution activity that the big cargo ships need.” As a result, Sands believes these ships still won’t arrive in significantly greater numbers, even if the harbors are deeper.

Worry in the West

Much of the increased traffic expected by east coast ports will be comprised of ships from Asia that had previously been too big to get through the canal. Prior to the expansion, these ships landed at west coast ports and shipped their goods east by rail.

One estimate claims that canal expansion will claim as much as 35 percent of current west coast freight, as it will now be more cost-effective to transport them directly to the eastern United States.

That may be bad news for the railroad and trucking industries, as well as western U.S. ports like those at Los Angeles and Long Beach, which is currently in the midst of its own $4.6 billion expansion.

But it’s not all doom and gloom on the left coast. Shippers of goods that need to get where they’re going faster may still favor intermodal land bridge options, where a trip from Shanghai to Chicago can be made in less than 20 days. The all-water route through the Panama Canal can take up to a month.

Also, just as the Panama retrofit prepares to accommodate larger ships, even bigger vessels of up to 18,000 TEU are becoming more commonplace—and they can’t get through the expanded Panama Canal.

While analysts debate the short-term impact of the canal expansion, the impact on international shipping will not be fully realized for decades. U.S. ports preparing five-year strategies may need to wait 50 years to see the overall results.

Need a Logistics Provider?

Compare over 100 Instantly



Videos

Sponsored Content

Download the FREE Global Trade Magazine APP!

Sign up for our newsletter!