Future Implications of the Panama Canal Expansion
Since 1999, the Panama Canal has attracted more and more traffic. Supply chain strategists are all looking at the Panama Canal expansion to see what effect the expanded Panama Canal will have on business.
Scheduled to open in 2015, the expanded Canal will have a third set of locks. “The third set of locks will add a third lane, which will be wider and deeper than the current canal,” says Richard H. Thompson, managing director, supply chain and logistics solutions, with Jones Lang LaSalle. Today, ships passing through the Panama Canal carry a maximum of 4,400 20-foot equivalent units (TEUs) and draft less than 39 feet.
The $5.25 billion new locks will accommodate “Post-Panamax” vessels carrying a maximum of 12,600 TEUs, almost three times the volume of today’s ships, and drafting to 50 feet.
Once completed many questions will still remain: Will the shipments flowing through the canal continue to increase when the expanded canal opens in 2015? Will the intermodal railroads and trucking firms cut prices to win business back? How much more will it cost to use the Canal? Will east coast ports spend what’s necessary to accommodate the bigger ships?
“There are lots of moving parts to consider when you analyze how the expanded canal might change supply chains,” says H. Donald Ratliff, PhD, executive director of the Supply Chain & Logistics Institute at the Georgia Institute of Technology in Atlanta. “You have to balance answers to all of these questions, and factor in changes as they happen.”
Is the past a prelude to the future? Maybe not
“In 1999, 86 percent of the cargo moving from China to Atlanta came through the west coast, was put on a train in the Port of Long Beach (or Los Angeles) and moved across the country to Atlanta,” says Page Siplon, executive director of the Georgia Center of Innovation for Logistics in Savannah. “There it was loaded into trucks and disseminated.”
By contrast, just 11 percent of freight moving from China to Atlanta traveled all the way by water through the Panama Canal and up the east coast. Three percent of that freight passed through the Suez Canal.