30 May 2016

The Panama Canal opened in the summer of 1914, carving a link between two oceans and revolutionizing maritime travel. The new expansion project is 98% finished as of May 2016. Businesses will be best served preparing their infrastructure and logistics for the future.

Keeping up with the shifting demands of pan-oceanic trade is the talk of the town. Neighboring countries are working hard to adapt their harbors and infrastructures in order to better receive the “post-Panamax” ships, while also forging trading treaties to maximize the benefits. The impact of widening the chamber devices that control water levels in narrow pathways will also affect major U.S. distribution hubs – even the ones located inland.

“Post-Panamax” ships traveling the new passageway will be 25% longer, 50% wider and have a deeper draft (going from 39.5’ to 50’). These vessels will be able to carry about three times the amount of merchandise as traditional ones while nearly tripling the cargo volume, increasing it from 4,400 20-foot containers to 12,600. This increment in cargo capacity will unmistakably throw storage facilities and harbors into deep flux. To absorb the product flow, warehouses and distribution centers will have to be modernized (automated for maximum efficiency), expanded or built from scratch, creating a unique opportunity for growth within the material handling industry. The additional amount of products delivered will have to be stored, accessed and distributed somewhere, which will require the development of state-of-the-art warehouses and logistics operations.

Expanding to the U.S.

The United States will be one of the markets most impacted by the changes, since it is the destination or origin of about two thirds of the merchandise traveling through the canal. Storage and logistics companies are projecting growth and expecting to continue seeing progress. These businesses need to build infrastructure to house more products.

It isn’t just the storage companies looking to make their front doors bigger; some of the hemisphere’s busiest seaports are stretching, too. In order to keep its harbors competitive, $8.5 billion has been slotted to update 13 of the leading U.S. ports.
Many of the investments from southern and eastern U.S. ports have been made in anticipation of increased traffic coming up from the Panama Canal, as well as diverged traffic that once used to travel to West Coast ports. West Coast ports, on the other hand, look at the investment as a way to retain current customers and attract new ones following the canal improvements.
The new traffic pattern will mean a much needed economic revitalization for Miami, the U.S. port closest to Panama. Miami is also spending half a billion dollars, through public and private partnerships, to dig a tunnel under its downtown and direct truck traffic away from congested surface streets.

In New York Harbor, the problem is not one of depth, but of height. The Bayonne Bridge, connecting Jersey’s Bayonne with New York’s Staten Island, is too low for the post-Panamax traffic to clear. To ensure the new vessels are able to clear the bridge, the port authority will spend $1 billion to raise the bridge 64 feet, an engineering feat that will take five years to finish.
The East Coast is also busy getting ready for the new maritime traffic patterns. Products that have been historically delivered by ship to the West Coast and distributed by rail and trucks throughout the U.S. will arrive directly into the East Coast. This will result in savings on distribution costs, lowering of retail prices and creating a mad scramble to recover from the hit the logistics industry will take.

The possibility of such an economic boost to these port cities is pushing those municipalities to get ready to receive the ships and have the right logistics in place to distribute the materials quickly and efficiently.

Inland Cities

Not all the changes are happening close to the ocean; non-port cities like Chicago, Dallas and Atlanta are preparing for the intermodal traffic increase and are expecting to reap the benefits of the boost in commerce. Overall more demand is expected at the inland distribution hubs due to the increased flow of cargo from the ports.

Intermodal traffic has been increasing steadily, and Class I railroads are investing in intermodal yards, track work and rail facilities. Such an increase in material movement will squeeze distribution hubs to fine-tune their logistics application, space use and the overall organization of their systems.

The central locations of these cities in the United States make them the next step in the distribution of all the extra merchandise delivered to the harbors. All the infrastructure investments at the ports will move goods more efficiently, thereby helping reduce the transportation costs. Making sure they are ready to absorb and re-distribute the sizably larger amount of products will enable inland cities to profit significantly from the new shipping patterns.

Keep the Moving Parts Clean

The new expansion to the Panama Canal is expected to cost $ 5.25 billion. Construction will be financed by development banks that will be repaid with the tolls collected from the ships that travel through the canal – tolls that can reach several thousand dollars for large vessels.

Experts predict that vessels will serve fewer ports and use intermodal transportation like trucks and smaller ships to distribute containers and cargo to nearby cities. The U.S. Department of Transportation estimates that port traffic will double or triple by 2030. Time will tell, but it certainly seems the U.S. will need every port ready and open for business now that the new canal is open for use.