How the Panama Canal Expansion Will Impact U.S. Logistics

By Steve Raetz on Dec 2, 2015

What will happen when the Panama Canal expansion is completed in 2016? Shippers should pay attention to this study by Boston Consulting Group (BCG) and C.H. Robinson to be prepared for the shifts ahead.

The Panama Canal is over a century old. And the canal was too small for the Post-Panamax vessels, which carry two to three times as much cargo as the ships that currently squeeze through the Panama Canal.

The Post-Panamax vessels, which are the length of four U.S. football fields, make up about 16% of the global container fleet but carry 45% of the container cargo. Within 15 years, they will carry nearly two-thirds of global container traffic. Right now, these vessels travel from Asia to Europe through the roomy Suez Canal. Few East Coast ports can currently accept them.

This is all about to change. When the Panama Canal expansion is completed in 2016, it will have new locks and wider, deeper channels that can accommodate Post-Panamax vessels and more traffic. East Coast ports are preparing to receive the vessels, too. They are widening and deepening their channels and installing larger off-loading cranes. The port at New York-New Jersey is raising a bridge so the 160-foot-high vessels can reach the docks.

What does all this mean for shippers?

• Competition will heat up between the West and East Coasts, and between the Panama Canal and the Suez Canal, for East Asia business. While passage through the Panama Canal will be faster, the Suez is now being modernized to allow for faster transit and two-way traffic of the larger vessels.
• Currently, 66% of container traffic from East Asia goes to West Coast ports, 20% travels through the Panama Canal for eastern destinations, and 14% reaches the East Coast through the Suez Canal. After the Panama Canal expands, more of this traffic is expected to go from East Asia through the Panama Canal to East Coast ports. With increasing global trade, larger ports on the West Coast will still handle more containers than they do today, but will experience lower growth rates.
• The investment and routing decisions of rail and truck carriers, and the location of distribution centers, are likely to change, based on trade-offs that shippers make between the cost and speed of transportation.