An expanded Panama Canal could shift some pacific freight to the east coast. carriers and rail lines are scrambling to meet opportunities. Are you missing the boat?
In August 2014, exactly 100 years after it was first completed, the Panama Canal will celebrate another milestone when a nine-year $5.25 billion expansion project is complete. The widening and deepening of existing channels and a third set of locks will accommodate containerships that deliver two to three times the freight of current vessels.
From a shipping-cost standpoint alone, doubling containership capacity from the current 4,000 20-foot equivalent unit (TEU) to 8,000 TEUs would make it possible for 17 percent more of the U.S. population to reap cost savings from using the Panama Canal rather than porting on the West Coast [Figure 2].
“Shippers get access to more of the population with bigger ships because of the economies of scale – costs per TEU go down, so you can go deeper into the interior United States through East Coast ports compared to West Coast ports,” says Bob West, a principal strategist with WorleyParsons Group. The firm developed a model with Princeton Consultants to calculate the impacts of the expansion [Figure 2].
How much freight actually will be rerouted through the Panama Canal remains to be seen, but shippers and their customers are taking a closer look at the new alternatives to optimize supply chain networks.
“For those retailers and shippers who have a lot of volume and a heavy store base in eastern U.S. markets, the Panama Canal expansion has extra potential for them to cut costs from the supply chain,” says Casey Chroust, executive vice president of the Retail Industry Leaders Association.
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