Fleet Management News & Business Info | Commercial Carrier Journal
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6 commercial carrier journal | august 2016 The Panama Canal expansion opens door for East Coast operations A shift in ocean freight patterns could happen sooner rather than later BY JEFF CRISSEY W hen the U.S. Army Corp of Engineers com- pleted construction of the Panama Canal in 1914, it ushered in a new age of world trade. The canal connected the Pacific and Atlantic oceans with a 50-mile channel, shortening the shipping lanes between continents by thousands of miles. The Panama Canal, which could accommodate container ships with capacities of up to 5,000 twenty-foot equivalent units (TEUs), had gone largely unchanged for 102 years. That all changed on June 26 when the Cosco Shipping Panama containership – a 9,400-TEU behemoth measuring 984 feet long and 158 feet wide – navigated its waterways. The event marked the end of a nine-year project by the Panama Canal Authority to create two larger lock systems to allow up to 14,000-TEU ships to sail through the canal, effectively dou- bling or tripling the canal's throughput. The implications for global maritime trade are signifi- cant. Many shipping companies have added the larger "Neopanamax" vessels to realize economies of scale, and the Panama Canal expansion literally unlocks a new door for these ships to traverse the globe. Some estimates call for the Panama Canal's market share of global shipping traffic to increase from 5 percent to 8 percent in the com- ing years as a result of the expansion. "The expansion provides us with more options, most notably to our Asia to South America and Asia to U.S. East Coast routes," says Anders Boenaes, head of network for Denmark-based Maersk Line, the world's largest ship- ping company with more than 600 vessels. "It is likely that Maersk Line will make increased use of the expanded Panama Canal and adjust one or more services with larger vessels to begin sailing through its new locks." The eastern United States always has been a major customer for the Panama Canal. Today, more than 60 percent of all container traffic through the canal either originated from or is destined for East Coast ports. In North America, the million- dollar question on everyone's mind is how, if at all, will the expanded Panama Canal impact U.S. freight patterns and trucking operations? If it does, it likely will come from container traffic moving from ports on the West Coast to key ports on the East Coast, includ- ing Houston, Savannah, Norfolk and the Port of New York and New Jersey. The degree to which that will happen remains unknown. The consensus is that any shift won't happen overnight. While most major East Coast ports can accept up to 10,000-TEU ships, they are scrambling to complete bil- lion-dollar projects to host the 14,000-TEU ships capable of passing through the Panama Canal. The Port of New York and New Jersey is set to complete the Bayonne Bridge navigational clearance project late next year, while the Port of Charleston and Port of Savannah currently are work- ing on dredging projects to allow the largest Neopanamax ships to reach their ports in the next two years. "The shift won't be immediate, but it will happen sooner rather than later," says Danny McComas, president of MCO Transport, a Wilmington, N.C.-based container drayage and domestic truckload company. The car- rier already is adding chassis and tractors to its fleet in anticipation of volume increases, but McComas insists the company is taking largely a "wait-and-see attitude." Port operators also are bullish. "We expect cargo expan- sion as a result of the widened Panama Canal to be incre- mental but steady as shipping lines take advantage of cost savings of an all-water route to serve the U.S. Southeast market," says Griff Lynch, executive director for Georgia Ports Authority. In addition to port improvements at Savannah and Brunswick, the state of Georgia is making improvements to inland truck and rail access to ease con- gestion ahead of the anticipated volume increase. The Panama Canal expansion certainly will impact U.S. surface transportation in favor of East Coast operations. But by how much and when are the key questions. When that time comes – whether it's in the next year or the next 10 years – even a 10 percent shift could have a major im- pact on the U.S. trucking industry. UPFRONT JEFF CRISSEY is Editor of Commercial Carrier Journal. E-mail jcrissey@ccjmagazine.com.