Container traffic from Asia to the US could move from West Coast ports to East Coast ports by 2020, following the opening of the expanded Panama Canal, according to the Boston Consulting Group (BCG) and CH Robinson.
In a new research report entitled ‘Wide Open: How the Panama Canal Is Redrawing the Logistics Map’, the companies’ say that up to 10% of cargo could be rerouted to the East Coast, a volume equivalent to building a port roughly double the size of Savannah or Charleston.
The research, claimed to be the most comprehensive public study of how the canal’s expansion could change the way cargo moves, either by water and land, into and within the US, was based on extensive scenario analyses of differing levels of demand, capacity, and costs.
With global container flows rising, the US$5bn Canal expansion is expected to permanently alter the competitive balance between ports on the East and West coasts of the US. While West Coast ports will handle increased traffic, the research predicts that they will experience lower growth and a drop in market share.
With Canal expansion enabling larger, more efficient ‘post-Panamax’ container ships to reach the East Coast, ports on that coastline will become more cost competitive. West Coast ports, however, will remain the destination of choice for shippers who need to use the fastest routes possible.
According to the research, after the Panama Canal expands the battleground region in which East and West Coast ports will compete for customers will probably grow and shift west towards Chicago and Memphis, encompassing a region that accounts for about 15% of US GDP.
“With the Panama Canal’s expansion, shippers will have more options and carriers will compete to provide those options,” said Peter Ulrich, a BCG partner and the leader of the firm’s transportation and logistics topic area in North America.
“Rail, truck, and ocean carriers will all have to reconsider their routing and investment decisions. Shippers will need to make fundamental choices, such as where to locate distribution centres and how to segregate their cargo heading for the heartland,” he suggested.
In 2014, about 35% of container traffic from East Asia to the US arrived at East Coast ports.
According to the report, current growth trends would push that share to 40% by 2020 without the canal’s expansion; with the expansion in place, the East Coast’s share could reach 50%, a 10% increase in market share.
Under any scenario, all major US ports will have greater container traffic in 2020 than they do currently, states the report. However, Los Angeles-Long Beach, the largest port complex on the West Coast, will handle less traffic than if the expansion were not to occur. That complex will likely experience growth at an average rate of 5% to 10% per year through to 2020, compared with double-digit growth rates at some East Coast ports.
On the East Coast, New York–New Jersey port and the ports of Norfolk, Savannah, and Charleston are well positioned to gain traffic by virtue of their relative proximity to the ‘battleground region’ and attractive rail routes to major markets. As the East Coast’s largest ports, they are also likely to be on the routes of the post-Panamax vessels, which tend to make fewer, longer stops than smaller vessels.
“Companies accustomed to shipping to the West Coast and relying on relatively fast rail service to cover most of the country will need to take a much more segmented and dynamic approach,” said Sri Laxmana, director of ocean services at CH Robinson.
“When time is of the essence, that routing may continue to make sense; for other products, the savings of shipping through the Panama Canal will likely outweigh the extra time in transit,” he commented.
(Source: Dredging News Online)