Reading the title many will think that I am mistaken by the fact that the Panama Canal won’t truly be open until late 2015 and possibly even into 2016 given the current time tables. Yet, what I am referring to is that the Panama Canal is already expressing its impact on East and Gulf Coast ports. Every time I attend a conference, meeting, or industry event, I am constantly asked what I believe the impact will be of the expanding canal.
These conversations always start with two schools of thought, first, the expansion will not bring about any change in trade lane growth, or second, that the expansion will be similar to flood gates opening with larger vessels flying through to bring cargo to expanding ports. Both mindsets could of course potentially be correct and only time, and well rates will help determine the accurate answer. However, in the interim, and for good measure of debate, my responses are always simple. The expansion has happened and is happening as we speak.
Volumes continue to rise on the East and Gulf Coasts by double digit numbers, while the West Coast is experiencing double digit losses on the transpacific eastbound trade lanes. Taking those numbers into account, one must look at the capital investment being made not only by the Panama Canal, but also numerous ports around the country. The dredging wars occurring are not being done simply for transatlantic trades but for globally expanding trade lanes, especially those focused in Asia. Asia continues to be a strong trading partner with zero signs of slowing down.
Another strong and indicative factor that needs to be addressed are our ocean carriers order books. The purchasing and construction of larger vessels mean that the cascading of fleets is bound to happen, thus moving larger vessels into the transpacific trade lanes to be the work horses for the East and Gulf Coast ports. Working on speculation of course, we would like to assume that larger vessels would equal lower landed costs to the shipper as well, thus even further incentive’s beneficial cargo owners to look into further diversifying their supply chain portfolios. An added incentive to further varying their supply chain is the already demanding and difficult business environment presented to them on the West Coast.
The unstable conditions continue to provide an uneasy environment for many of the nation’s key companies, and as struggles continue, the search for alternative gateways continues. Companies are also looking at new locations throughout the country to either move or expand their distribution center network. All of these factors play key roles in the decisions that companies are making to determine which ports are best suited to receive their shipments. These factors are why I tell people, the Panama Canal has already opened, and that the growth we see and will continue to see has little to do with the expansion of the actual canal. Will the expansion prove to further enhance the aforementioned growth? Of course, but the opening will merely be the starting line in the already expanding global trade.