Panama Canal Expansion: Challenges for NYNJ - Global Trade Magazine
  August 17th, 2016 | Written by

Panama Canal Expansion: Challenges for NYNJ

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  • Will expanded Panama Canal deliver more cargo to NYNJ?
  • How will NYNJ handle an increase in cargo volumes?
  • BMI: Improvement in labor relations necessary for dealing with growing NYNJ throughput.

“The port of New York-New Jersey will face short-term challenges in taking advantage of the expansion of the Panama Canal to capture an increasing share of Asia-US trade.”

That’s the bottom line for the largest port on the United States east coast, according to research from BMI.

“Continuing infrastructure deficiencies, ongoing labor tensions, and significant congestion on inland transport routes,” BMI went on to conclude, “will hinder the ability to manage larger throughput volumes, and cause supply chain delays.”

U.S. east coast ports, including the port of New York and New Jersey, are counting on the expanded Panama Canal to increase their share of U.S.-Asia by providing a competitive alternative to west coast ports. The east coast ports do present several advantages over the west coast, the BMI research noted, including closer access to large consumer markets and a lower frequency of labor disputes. Some volume has already shifted to the east coat at the expense of the ports of Seattle, Oakland, and Los Angeles, and some container carriers have started to call at east coast ports with larger vessels, thanks to the expanded capacity of the Panama Canal.

The problems for the port of New York and New Jersey, according to BMI, will be how it is going to handle a presumed increase in volumes. The project to raise the Bayonne Bridge, which will allow larger vessels to transit the channels connecting New York Bay with container terminals in Newark and Elizabeth, New Jersey, will not be completed for a year and half.

“Numerous delays to the Bayonne Bridge project continue to limit the extent to which the port will be able to receive these vessels,” BMI noted. “Some major international shipping companies, including AP Moller-Maersk and Hapag Lloyd, have consequently elected not to change their routes, as the inability to access New York-New Jersey with larger ships means they are unable to achieve necessary economies of scale by plying east coast rather than west coast routes.”

Although labor relations in NYNJ are better than in some west coast ports, BMI cautioned that “an improvement in labor relations will be necessary for dealing with growing throughput.” The port experienced a wildcat strike last January, causing hours of delays in offloading containers.

“Even relatively small disruptions pose considerable costs to businesses reliant on efficient supply

chains,” the BMI report said. “Labor unrest is likely to continue as the port attempts greater automation, a process which is opposed by trade unions.”

Larger ships offloading largers volumes of cargo will also exacerbate congestion in New York area, already the fifth most congested city in the U.S. “It will be some time before more efficient unloading and dispatch of containers is developed by port authorities,” BMI concluded “and both congestion in the terminals themselves and on surrounding roads will likely increase in the short term.”