Friday, June 19, 2015

Study: Panama Canal Could Divert 10 Percent of Cargo

By Mark Edward Nero

The expansion of the Panama Canal “will be the headline event in shipping in 2016” and is set to “reorient the landscape of the logistics industry and alter the decision-making calculus of the shippers that the canal serves,” according to a new study.

According to the research, which was conducted jointly by the Boston Consulting Group and logistics provider CH Robinson, as much as 10 percent of container traffic between East Asia and the US could shift from West Coast ports to East Coast ports by the year 2020.

According to a new study, the $5 billion expansion project will have profound effects once it’s complete.

“The larger ports on the West Coast will experience lower growth rates, altering the competitive balance between West Coast ports and East Coast ports,” the report states, although it also mentions that with global container flows rising, West Coast ports are still expected to handle more containers in the future they do currently.

West Coast ports currently receive two-thirds of container flows from East Asia, with much of that cargo moving by rail and truck as far east as the Ohio River Valley, about three-quarters of the way across the US But once post-Panamax vessels start passing through the expanded canal, the shipping dynamics will change, the report predicts.

In addition to diverting vessel traffic from East Asia away from the West Coast, the Canal’s expansion is also expected to shape the investment and routing decisions of rail and truck carriers, as well as magnify the trade-offs that shippers make between the cost and the speed of transportation, and potentially alter the location of distribution centers.

“There almost certainly will be a shift in the mix of West Coast versus East Coast traffic, and shippers and carriers should start preparing for that shift now,” the report states.