Infrastructure Limits Shift to East Coast Ports: Study

West Coast ports will lose ground in the U.S. trade with Asia when the Panama Canal is enlarged, but how much market share East Coast ports will gain at their expense is yet to be determined, according to a transportation industry analyst.

Panama in 2014 is scheduled to complete construction of a third set of locks at the canal. Vessels up to 12,000-TEU capacity will transit the canal and call at East Coast ports. The canal at present is limited to vessels of slightly more than 5,000-TEU capacity.

When the capacity and overall efficiency of the canal are increased, East Coast ports will attract more of the Asian imports that move to retail distribution facilities in the eastern half of the country.

Bruce Lambert, executive director of the Institute for Trade and Transportation Studies in Mandeville, La., said the fastest growing distribution hub of the country is located in a region stretching from the Ohio Valley to the Southeast and west to Memphis and Kansas City.

West Coast ports, where mega-ships of 8,000 to 10,000-TEU capacity regularly call today, serve many of those distribution centers via intermodal rail. However, retailers and other importers are seeking alternative gateways due to increasing intermodal rail costs, the imposition of port fees in Los Angeles-Long Beach and an unfavorable perception of longshore labor on the West Coast.

“Cargo will go where it is the most competitive,” Lambert told the Canada Maritime conference sponsored by The Journal of Commerce Thursday in Vancouver.

Lambert recently completed a study on the Panama Canal for the 13 Southeast and Gulf Coast states that support the Institute for Trade and Transportation Studies.

Those states see a bonanza of cargo when the canal is enlarged, and they will certainly gain some market share at the expense of West Coast ports, Lambert said. A study earlier this year by Drewry Shipping Consultants in London projected as much as a 25 percent market shift, but Lambert said that conclusion is “on the high side.”

A number of factors will determine cargo flow once the canal is enlarged. For example, will Los Angeles and Long Beach continue to “push cargo away” through fees and other policies, he asked. Lambert formerly worked in marketing at the Port of Long Beach.

Most East Coast ports are incapable of handling mega-ships due to water draft limitations, or, in the case of New York-New Jersey, bridge clearance issues.