East vs. West: Panama Canal Expansion to Affect Port Traffic

By Alex Batty, MHI Marketing Communications Coordinator |@mhi_alex

With the Expansion of the Panama Canal, analysts are anticipating that shipping lane traffic will shift as large ships from East Asia can now choose to move through the Panama Canal, bypassing western ports and creating competition. In a white paper by Boston Consulting Group and C.H. Robinson, Wide Open: How the Panama Canal Expansion is Redrawing the Logistics Map, they observe that because shipping companies now have more choice in port landing, port selection will now become more and more about how connected those ports are to the rest of the country to decrease costs from shipping overland.

Western ports like Los Angeles, Long Beach, and San Diego have traditionally been well used for shipping because they are well positioned to handle traffic to major population centers and are situated close to a large share of the US.  Traditionally, West Coast ports receive two-thirds of the material flow from East Asia.

However, the canal may shift more traffic to a region that accounts for more than 15% of the GDP, the Chicago-Memphis alley, as opposed to landing in a West Coast port and being shipped overland. It’s predicted that as much as 10% of the traffic flow could move from West to East. Still, as global shipping continues to increase, ports on the West Coast will still see increased traffic; they just won’t experience as large a growth as expected now that traffic can be diverted directly to other parts of the country.

Southeastern ports as well as New York/New Jersey are well positioned to funnel product to this area of the country and Gulf of Mexico ports may expand to meet increased demand.

As customers want faster shipping times for lower costs, shippers will be looking to be more efficient and cost-effective and the Panama Canal expansion may change port traffic and affect supply chain hub activity. For shipping, West Coast ports may be the fastest, but will no longer necessarily be the cheapest.  For more in-depth information about the analysis, visit https://www.chrobinson.com/en/us/Resources/White-Papers/ to download your free copy of the white paper.