Panama Canal Expansion Will Likely First Affect New York-to-Ohio-Valley Intermodal

Increased intermodal traffic from the New York/Baltimore area ports to the Ohio River Valley region will likely be the first effect when the Panama Canal opens its new, larger locks in late 2014, according to Scudder Smith, a consultant who has advised the U.S. Maritime Administration and the Panama Canal Authority.

In a conference call Friday sponsored by Stifel Nicolaus, Scudder explained that the new locks will accommodate ships roughly two and a half times larger than can currently go through the canal. Currently, the canal can's handle container ships with capacities larger than 5,000 TEUs (twenty-foot equivalent units). With the expansion, container ships approaching 13,000 TEUs in capacity will be able to travel through the canal.

Container shipping and dry bulk shipping will be the most likely services to benefit from the canal's expanded capacity.

The expansion may prompt some Asia-to-U.S. container traffic to go through the canal and deliver to East Coast ports, rather than delivering at the West Coast ports and shipping containers overland via train or truck. However, Scudder pointed out that the cost savings, about $100 per container, or 5%,, won't be enough to offset the extra two weeks for the transit through the canal for many types of freight.

Not all East Coast ports are yet able to handle the larger vessels. The ports in New York, Baltimore, and Norfolk will be the first, and are all within striking distance of the Ohio Valley. CSX and Norfolk Southern have been investing heavily in their intermodal routes between these ports and the Midwest, so at least at first, the coastal share shift that occurs will likely involve freight destined for the Ohio Valley, notes Stifel Nicolaus in its conclusions.

Later on, as the ports of Miami, Savannah, and perhaps Charleston finish deepening their channels, we may see more freight shift from the West Coast to these southern Atlantic ports in order to feed traffic into the Atlanta are, which generally serves as the major distribution center for the Southeast.