LONG BEACH, October 27 – For more than 20 years, assorted interests in the United States have worked to create a four-corner supply chain strategy, aimed at reducing the nation’s dependence on the US West Coast alone.
Recent results show those efforts have paid off as ports along the East and Gulf coasts of the country see more and more cargo coming their way.
That strategy began to develop in 2002, when representatives of the Panama Canal Authority paid a visit to Los Angeles and witnessed first-hand the adverse impact that stalled labor negotiations were having on the movement of cargo out of Southern California.
“We saw plenty of opportunity for ourselves,” one member of that Panamanian delegation recently told Cargomatic. “We realized that our Panama Canal could make a real contribution to the solution of that problem – it just needed to become bigger.”
‘Shippers had few options’
Back then, on October 1, 2002, the Los Angeles Times summed up the situation aptly, saying that “shippers have few options for moving transpacific goods.”
It said the dockworkers’ union “controls all US ports on the West Coast, and ports in Canada and Mexico are too small to handle the large container vessels now used to ferry goods from Asia to the United States. Most vessels are also too large to fit through the Panama Canal or to dock at East Coast ports.”
News of the proposed enlargement of the Panama Canal did not take long to reverberate across North America. On October 26, 2002, the Montreal Gazette published an interview with the Canal administrator Alberto Aleman under the headline “Panama considers expanding its canal.”
“The Panamanian government’s Panama Canal Authority is making $200 million in improvements to allow longer ships and is considering an increase in lock size to accommodate even larger ones that now dock at the United States West Coast,” the paper reported.
Canal traffic rose
Aleman acknowledged that the Canal’s traffic rose about 15% during the West Coast shutdown in October 2002. But he said even more traffic could pass through if the waterway were expanded to accommodate vessels greater than the canal’s maximum of 294 meters long by 32 meters wide, with a maximum 12-meter draft.
At the time, larger vessels coming to the US Atlantic coast from Asia had to ship their goods around Tierra del Fuego, the southern tip of South America, an additional 11,265 kilometers. Or they had to take the westerly route from Asia through the Suez Canal and across the Atlantic.
Christopher L. Koch, then president and chief executive officer of the World Shipping Council, which represents most of the world’s container shipping companies, said industry support would hinge on the cost-benefit ratio of the improvements. “It’s too soon to say without having seen a firm plan,” he told the paper.
But people soon warmed up to the idea, especially as the labor impasse lingered on in the West Coast for months and threatened to be repeated every time new contract negotiations were needed.
US ports boost investment
Indeed, ports along the US East and Gulf Coasts quickly began gearing up for a bonanza as more and more shippers sought to bypass whatever troubles might occur on the West Coast and take the all-water route to and from Asia through the Panama Canal.
With a 2016 opening of the expanded Canal in the works, US ports began a massive investment program aimed at attracting the waves of cargo passing through Panama.
Altogether, according to figures of the American Association of Port Authorities, between 2012 and 2020, US ports saw projected expenditure of $200 billion, mostly going into ports along the East and Gulf Coasts.
The results have been more than evident in the past few months as those ports have been experiencing much higher than normal volumes of cargo crossing their terminals while, on the West Coast, the volumes have been lower.
Indeed, according to Cargomatic calculations, there has been a 3% shift year-to-date in volume from the Pacific to the Atlantic and Gulf Coasts. But the big question is whether this shift is permanent or temporary.
Cargo in 3% shift from West to East
Beth Rooney, Director of the Port of New York & New Jersey, told a recent press conference that “70% of this year’s growth is West Coast cargo that has shifted to New York and New Jersey.” She also believes that the increased market share from West to East will remain with her port.
That may be, but people out West aren’t giving up.
“We’ve got to do our level best to recapture what has moved and continue to grow our share,” said Port of Los Angeles executive director Gene Seroka. “I’m pretty competitive and I don’t want to lose a pound of freight to anybody else,” he told a news conference.
That being the case, one can look forward to a lot of competition among US ports in the coming months.
Photo: The Panama Canal has been a game-changer for US cargo trends. Credit: World Bank
