How the Panama Canal Expansion Will Impact U.S. Ports and Freight Traffic


    The highly anticipated Panama Canal Expansion is only 4 months away from being completed; it is expected to be completed by May 2016. The project is now 96% complete and final electro-mechanical installations are underway. This is the largest project at the Canal since its original construction. The project will create a new lane of traffic along the Canal through the construction of a new set of locks, doubling the waterway’s capacity. The existing locks allow the passage of vessels that can carry up to 4,800 TEUs. After the expansion, the Post-Panamax vessels (large vessels that do not fit in the canal) will be able to transit through the Canal, with up to 12,000/13,000 TEUs. The expansion will double the Canal’s capacity, having a direct impact on economies of scale and international maritime trade.

    The Panama Canal is over a century old. The canal was too small for the Post-Panamax vessels, which carry two to three times as much cargo as the ships that currently squeeze through the Panama Canal. Post-Panamax or over-Panamax denote ships larger than Panamax that do not fit in the canal, such as supertankers and the largest modern container ships make up about 16% of the global container fleet but carry 45% of the container cargo. Within 15 years, nearly two-thirds of global container traffic is expected to be carried by these vessels. Right now, these vessels travel from Asia to Europe through the larger Suez Canal. Few East Coast ports can currently accept them.

    However, with the expansion of the Panama Canal, this is all about to change. The newly expanded Panama Canal will have new locks and wider, deeper channels that can accommodate Post-Panamax vessels and more traffic. East Coast ports are preparing to receive these vessels; they are widening and deepening their channels and installing larger off-loading cranes. Several ports, including the ports of New York and New Jersey, Norfolk, and Baltimore (all on the east coast of the United States) have already increased their depth to at least 50 feet (15 m) to accommodate these changes.

    Currently, 66% of container traffic from East Asia goes to West Coast ports, 20% travels through the Panama Canal for eastern destinations, and 14% reaches the East Coast through the Suez Canal. After the Panama Canal expands, more of this traffic is expected to go from East Asia through the Panama Canal to East Coast ports. With increasing global trade, larger ports on the West Coast will still handle more containers than they do today, but will experience lower growth rates.

    However, competition among East Coast ports will increase and East Coast Ports are expected to gain 10% additional share from East Asia to U.S.  Most of the East Coast ports have already spent millions of dollars to maximize their volume with the help of extend for this anticipated expansion’s results. We will wait and see how this will affect the industry.

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    Nezih Akbas
    Nezih was born and raised in Turkey, where he got his Bachelor’s Degree in Econometrics from Uludag University. He moved to the U.S. in 2010 to get his MBA at Wilmington University. Nezih has been working in the logistics industry since 2014. Fun Fact: Nezih is a huge sports fan and has been following NBA since he was a little kid. He still believes that one day the Knicks will be as good as they were during the 1998-1999 season.