Last week, I spent three days in Portland at the Northwest Intermodal Conference
discussing the future of trade for the Pacific Northwest. While many of this region's concerns are unique because of its location, there was an overall theme that applies to the entire country. Importers, the transportation companies that service them, and ports are wondering what the landscape of trade will be after the Panama Canal expands in 2014.
This expansion will allow larger vessels to transit the canal and could potentially change the face of trade for ports and carriers servicing the U.S. market. To prepare for this momentous event, several ports east of the Panama Canal have deepened waterfronts to allow larger vessels to service them, but many of the major ports are unable to do so because of financial and structural issues. This could therefore be a boon for some ports, but change very little for others.
On top of the details regarding where steamship lines will route their fleets, there are several other factors at play that could decide how shippers want their freight moved. First of all, the trend for the last 8 years has been for more all-water service from Asia to the East Coast. Even with the recession, market share for ports located east of the Panama Canal have consistently gained on their western rivals. Shippers want a more direct service and carriers are reacting by delivering consumer products and raw materials directly to the population centers on the eastern seaboard.
Secondly, 2009 was a disastrous year for trade and imports in particular, demand fell and lines pulled vessels out of service to reduce operating costs. However, as the economy recovers over the next 5 years, traffic will again increase to 2007/2008 levels, during which heavy port congestion was seen in the Pacific Southwest. This could lead to similar delays as in the peak years when shippers waited for their products to be unloaded. Problems at Long Beach and Los Angeles could be doubled due to additional regulations targeted at cutting pollution associated with transportation that add costs to importing containers.
Thirdly, on the flip-side, others assert that very little could change because of the dynamics involved with sending ships through the canal. Just because the vessels are larger, it does not mean more voyages will be able to be made. In addition, the ports they service will likely not be in the hearts of the population centers like New York and New Jersey because improvements are unable to be made. Ports on the Gulf Coast do not set up for efficient vessel routes or intermodal lanes when large lines, railroads, and trucking companies plan their strings and infrastructures.
Finally, manufacturing may slowly begin to move from China, which is more easily serviced via an east-to-west route to the Pacific Coast to countries in Southeast Asia like Vietnam, in which a west-to-east route through the Suez is viable to reach customers on the East Coast of the United States. Changing supplier locations and customer needs will dictate where lines position their routes.
There are many more facets to this discussion and answers to the questions will not be known until the trade picture clears up. Shippers will decide how lines move containers and lines will decide what ports are the best options for them. Zepol
is here to provide the unbiased analysis of the available data from the U.S. government, but it is up to leaders at shippers, lines, and ports to forecast how these changes may affect their business, whether it is a gigantic or minor shift in trade.