The container vessel COSCO Shipping Panama made the inaugural transit of the expanded Panama Canal on Sunday, June 26, after a 14-day journey. It has a container carrying capacity of 9,472 TEUs. Photo: Panama Canal

The container vessel COSCO Shipping Panama made the inaugural transit of the expanded Panama Canal on Sunday, June 26, after a 14-day journey. It has a container carrying capacity of 9,472 TEUs. Photo: Panama Canal

After many delays, the larger locks of the Panama Canal opened this weekend, allowing larger ships carrying intermodal shipping containers coming from Asia to access East Coast and Southeast ports. While there has been much speculation that this could shift cargo traffic away from the busy West Coast ports, how exactly things will play out is yet to be seen.

The new locks can handle container ships that carry up to about 13,000 twenty-foot-equvalent units, or TEUs, depending on the design — nearly three times the 4,500-to-5,000-TEU capacity of Panamax vessels previously using the canal.

That means more cargo containers from Asia filled with consumer goods will be able to take a direct, all-water route to East Coast and southern ports. Some believe this will push growth of more regional trucking on both coasts, rather than the long-haul trucking of containers, or goods that have been trucked to distribution centers and offloaded into trailers.

The canal’s online booking system already shows 155 slots booked for the larger post-Panamax ships through the year, about 60% heading to the Atlantic, according to a report released by CBRE, a commercial real estate services company.

On the East and Gulf Coasts, ports have been making huge investments in dredging and other improvements so they can handle the larger ships.

However, even before the availability of the larger canal, these ports already have been pulling some traffic away from the West Coast, reports the Journal of Commerce, as contract disputes and labor uncertainty have made the congested West Coast ports less attractive to shippers. During the nine months ending in March 2016, their market share inched up to nearly 34%, up from 29% two years earlier, according to PIERS, a sister product of within IHS.

Currently, about 63% of container ships docking at the Ports of Los Angeles and Long Beach are the post-Panamax vessels that can carry up to 14,000 TEUs, reports the LA Press Telegram.

However, many analysts are predicting a milder impact for the West Coast than previously was thought would happen. For one thing, there have been delays in some of those East Coast/Gulf Coast port improvements. 

Gerry Wang, chief executive of Seaspan Corp., which charters large container ships to shipping lines, told the Wall Street Journal earlier this year that cargo shipping carriers are wary about the ability of the ports to handle the vessels.

In addition, we’ve seen the introduction of megaships that won’t fit through even the larger Panama Canal. Last December, the CMA CGM Benjamin Franklin, the largest container ship ever to call at a North American port with a capacity of 18,000 TEUs, docked at the Port of Los Angeles.

And actually, there's already been a shift over the past several years. CBRE notes that the major East and Gulf Coast ports accounted for nearly all of North America’s cargo volume growth last year. The West Coast’s market share dropped to 52% of all TEU volume last year, down from 54% in 2014 and 57% in 2010.

“This shifting preference means that the opening of the widened Panama Canal… likely won’t have as large an impact on cargo destinations as previously thought," says a CBRE announcement of the report. "Much of the cargo that could be transferred from West to East Coast delivery has already shifted.”

In order to fully take advantage of the cost and time savings of sending cargo via larger ships through the canal directly to the East Coast, businesses will have to reinvent their supply chain networks, not something that gets undertaken quickly.

However, longer-term factors could make the East Coast more compelling with or without the larger canal. Still, other long term factors will slowly make the East Coast more compelling, David Egan, head of industrial research in the Americas for CBRE, told the WSJ. East Coast ports will eventually catch up in terms of infrastructure, as costs in China rise, low-cost manufacturing may move to places such as India and Africa, where going through the Pacific may not make sense anyway.

About the author
Deborah Lockridge

Deborah Lockridge

Editor and Associate Publisher

Reporting on trucking since 1990, Deborah is known for her award-winning magazine editorials and in-depth features on diverse issues, from the driver shortage to maintenance to rapidly changing technology.

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