LOS ANGELES — Shippers will decide whether to shift their cargo routing from West Coast to East Coast ports when the Panama Canal expansion project is completed in 2015 based on the total delivered cost of the freight, transit time, intermodal options and ease of doing business with port authorities.
“It’s a customer-driven decision,” Dave Howland, vice president of land transport at APL Logistics, told the Society of Industrial and Office Realtors conference Friday in Los Angeles.
Builders and operators of warehouses and distribution facilities have a vested interest in international freight flows in the U.S. because they seek to place their assets near those ports that show the greatest growth potential.
Transportation experts addressing the industrial real estate conference said the ability to get vessels with capacities up to about 13,000 20-foot containers through the enlarged canal would most likely push the hinterland of East Coast ports to the west somewhat.
Howland said the new battleground for East Coast and West Coast ports will be along a line from Detroit to Atlanta. East Coast ports will have the upper hand serving destinations east of that line, and West Coast ports will be strongest west of the line.
A number of factors come into play, though, when beneficial cargo owners make routing decisions for shipments from Asia to the U.S. interior. Total delivered cost, including ocean, rail and trucking expenses and inventory carrying costs, are crucial. Inventory carrying costs are especially important to shippers of high-value cargo, Howland said.
Transit time is also important for high-value, time-sensitive and seasonal merchandise such as electronics and fashion apparel, he said.
When it comes to transit time for shipments from Asia to the U.S., West Coast ports are the clear winners, said Michael DiBernardo, director of business development at the Port of Los Angeles. Vessel transit is 12 to 13 days, with another five days to move the containers inland by rail. Transit times from the same origin points in Asia are 25 to 26 days, he said.
Intermodal rail can reduce transportation costs, especially when distribution centers are located at inland rail logistics hubs, said Patrick Kinne, general director of international marketing at BNSF Railway.
BNSF, for example, operates or is building rail logistics hubs at Fort Worth, Memphis, Kansas City and in the Chicago area. Those facilities combine rail and truck access and warehouse distribution space in the same location.
Kinne said locating a distribution warehouse at the railhead rather than 15 miles away can save an importer $90 on the truck move from the railhead to the warehouse. For a large retailer that handles 40,000 loads a year at the facility, the savings would be $36 million.
The inland rail hubs are also attracting exports, especially grain exports from surrounding locations. Because the hubs handle a steady flow of containerized imports, those same containers are available to exporters when the imports are unloaded at retailer facilities.
West Coast ports are already handling the 8,000- to 13,000-TEU vessels that will one day be able to transit the Panama Canal and call at East Coast ports, DiBernardo said. Now the ports are providing deeper water along the berths, building larger terminals and are automating the container terminals to handle vessels that are even larger than 13,000-TEU capacity, he said.