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

How the Panama Canal Expansion Impacts U.S. Logistics | Transportfolio

Blog-So-Cal-image-300x199The Panama Canal expansion opened to traffic in June 2016 and already it’s affecting global logistics. Ocean freight shippers should pay attention to this study by Boston Consulting Group (BCG) and C.H. Robinson to be prepared for the shifts ahead.

Brief Overview of Panama Canal Expansion

How the Panama Canal Expansion Impacts U.S. Logistics | Transportfolio

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 has and will continue to change with the Panama Canal expansion. New locks and wider, deeper channels 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.

Panama Canal Infographic

What Does the Panama Canal Expansion Mean for U.S. Shipping & Logistics?

What Does the Panama Canal Expansion Mean for U.S. Shipping & Logistics? | Transportfolio

  • Competition will heat up between the West and East Coasts, and between the Panama Canal and the Suez Canal, for East Asia ocean freight 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.

Final Thoughts

How the Panama Canal Expansion Impacts U.S. Logistics | Transportfolio

This is the most analytical public study yet that details how the expansion of the Panama Canal will alter the U.S. logistics landscape starting in 2016. There are more fascinating insights for the study in the BCG/C.H. Robinson white paper, Wide Open: How the Panama Canal Expansion is Redrawing the Logistics Map.

Authors include Sri Laxmana from C.H. Robinson and Jennifer Bratton, Dustin Burke, and Peter Ulrich from BCG.