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Focus: Global Supply Chain and Logistics

Our Weekly Feature Article on Topics Related to Global SupplyChain Logistics

From SCDigest's On-Target e-Magazine

Feb. 9 , 2011


Global Supply Chain News: As 2014 Suddenly Looms, US Ports on both Coasts Look to the Future with an Uncertain Eye

Panama Canal Expansion is Great Development for Importers and East Coast Ports - if Only They Could Handle the Megaships


SCDigest Editorial Staff


When voters in Panama approved a multi-billion dollar investment in 2006 to expand the Panama Canal to accommodate larger cargo ships, its target completion date of late 2014 seemed a long ways away, and who knew then whether the massive infrastructure project would be completed anywhere near on time.

The answer to that last question is a resounding Yes, it turns out. In October, Rodolpho Sebonge, an official at the Panama Canal Authority, told the audience at the annual CSCMP conference in San Diego that the project was actually well ahead of schedule.

Suddenly, 2014 doesn't seem so far away any more, and the looming impacts to global logistics are likely to be large. That is in part because the size of cargo ships the new Canal will be able to handle.

SCDigest Says:

The Army Corps has yet to evaluate all East Coast ports as a whole to determine which should dredged to post-Panamax depths, and which would reap the most benefits for the best price.
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IThe original design goal was to enable ships carrying 8000 TEU to get through the Canal. That was later raised to 12,500 TEU vessals, as the "megaship" trend became a growing factor in ocean shipping. Now Sebonge said, ship makers are figuring out how to get 14,000+ TEU ships through and meet the physical constraints.

The impact on the cost to get containers through the Canal using these larger ships will be substantial, reducing costs by as much as $75-100 per container per voyage.

Impact to East and West Coast US Ports

The Canal expansion will have major impacts on ports on both US coasts, though exactly how this will play out remains uncertain for sure.

On the West coast, especially the LA/Long Beach port complex, port operators are worried that many importers will decide to bypass their ports on ships coming from Asia and head through the Canal directly to East Coast or Gulf Coast ports instead. Currently, the majority of Asian traffic goes to LA/Long Beach, where it is largely moved by rail and sometimes truck to the Midwest and East coast, providing a better transportation path given the current costs and time required for an all-water route.

But the new Canal will change that dynamic. As the analysts at Business Monitor International noted two years ago, current Asia to US shipping lanes "will change dramatically when the expansion of the Panama Canal is completed. Shipping companies in Asia will be able to use the canal to bypass the West Coast and sail directly into Gulf of Mexico and East Coast ports such Charleston, Jacksonville, and Norfolk, allowing post-Panamax vessels that currently only call at West Coast ports to use an all-water route to reach the East Coast. This would be considerably cheaper than using water followed by rail to transport goods, while also offering companies more control over their supply chain."

Recognizing the challenge, the Port of Long Beach is investing $3 billion over the next 10 years to modernize its port and reduce bottlenecks for shippers, despite losing about one-third of its cargo business last year, primarily due to the recession and the drop in imports.

Can East Coast Ports Keep Up?

There is just one fly in this new global trade flow ointment - the East Coast ports aren't ready.

The so-called "post-Panamax" ships require depths of up to 50 feet of water to navigate the entry ways to the ports when fully loaded. The only East Coast port that has that capacity now is the one in Norfolk, VA.

Recognizing that which port(s) will emerge as the major East Coast or Gulf Coat shipping hubs is on the line, the other ports are trying mightily to expand their ship handling capacities.

"Those who are best prepared when the recession ends will have the best opportunity for rewards later," said Don Allee, chief executive of the Mississippi State Port Authority at Gulfport, which is undergoing a $570 million expansion.

The costs to make those expansions, however, are enormous. Just consider some of the projects scheduled or planned:

Port of New York/New Jersey: Has current $2.3 billion project under way to deepen its harbor to 50 feet, but to be able to handle the larger ships it must also raise the Bayonne Bridge that fronts the channel to the port. An additional $1.3 billion is required for that project.

Port of Mobile: Undergoing $600 million in upgrades, including a new container terminal and a turning basin for large ships.


(Global Supply Chain Article Continued Below)




Port of Savannah: Midway through an eight-year, $500 million expansion that will nearly double its container capacity. Now it wants another $588 million to dredge 6 feet from the Savannah River along 35 miles between the ocean and the port.

Port of Charleston:
Looking for $400,000 in federal money for a feasibility study by the Army Corps to determine if the port can be deepened from 45 to 50 feet. If the answer is Yes, hundreds of millions more would be required to complete the project.

Port of New Orleans: Has plans for a $250 million expansion, but has invested only $33 million of that itself. Looking to the Federal Government or private investors for the remainder.

Port of Miami: Has received Federal permission to dredge and deepen its port, but needs $75 million to start the project's first phase.

You may notice a thread here - the ports mostly want Federal dollars for part or all of the expansions, and those dollars today are not easily come by today.

First, the growing concerns over the US federal budget deficit and related pressure to cut discretionary and other spending means funds overall will be limited. Second, the money available for ports expansion in the past has usually come from the dreaded "earmark" process, which is now under assault from many quarters and which the new Republican leaders in the House say they have sworn off - at least for now.

You may ask why Federal dollars should go to expansion of a say the Port of Savannah, when the benefits will largely accrue to the state of Georgia - why shouldn't the state foot the bill?

Well, it turns out the Army Corps of Engineers looks at such things, and will recommend Federal funding if it deems the project will benefit "the nation as a whole."

However, as the Associated Press reported this week, the Army Corps has yet to evaluate all East Coast ports as a whole to determine which should dredged to post-Panamax depths, and which would reap the most benefits for the best price.

There is a lot at stake for all of these ports, and whether the states even in their generally dismal financial conditions will step in if the Federal support isn't coming through to help secure they have a shot a major hub status remains to be seen.

What do you make of the whole Canal-port scenario? How do you think this will play out? Any bets on which East or Gulf Coast port(s) will come out on top? Let us know your thoughts at the Feedback button below.

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Recent Feedback



We are a terminal rail freight complex in western Kentucky. 
We certainly appreciate our East Coast and Gulf Coast ports gearing up for the wave of new Panama Canal freight.  There is concern these ports have not ensured that its “upstream” or “inland” freight infrastructures and staffing connections are also prepared.
John Licht