Crux Systems Insights

Impacts of the Panama Canal expansion

June 2, 2017 by Eric Klein |

Shipping

One year ago the Panama Canal's expanded locks opened to accommodate container ships that can carry more than 13,000 TEU, nearly three times bigger than the 5,000 TEU ships that can pass through the original locks built more than 100 years ago. As a point of comparison, the largest ships today are over 20,000 TEU.

With the opening of the expanded canal last summer, there was a lot of speculation about the potential impacts on trade lanes. Would the US East Coast ports pick up East Asia trade, decreasing volumes through Los Angeles and Long Beach? Or would nothing really change at all?

Because we monitor cargo coming into every port in the US and Canada, we're able to get a big picture view of larger trends. Over the last year, our data has shown some shifts in trade lanes.

While we can't say that cargo is decreasing from any particular port due to the Panama Canal expansion, we have seen some impacts in new routings showing up, particularly in the Gulf of Mexico where there's been a significant uptick in direct traffic from China to the Port of Houston over the last year.

Before the expanded canal opened, the larger ships were unable to pass through the Panama Canal and typically would call at West Coast ports. Now that larger ships can go through the expanded canal, they can make direct calls to Houston, likely accounting for some of the increased volume the port has seen earlier in the year.

Very soon the Port Authority of New York and New Jersey will be finishing up their project to raise the Bayonne Bridge 64 feet in order to accommodate larger ships. With the port finally accessible to larger ships, some of the cargo coming through the expanded Panama Canal will now be destined for these terminals, although increases will likely be moderate.

However,  there is a key a shift in cargo happening and that impacts rail, trucking and other nodes of the supply chain. How large of shift still remains to be seen, but a shift is indeed happening.

Photo: On May 24, 2017, the 13,926 TEU OOCL France was largest capacity vessel to transit the Expanded Canal since it opened in June 2016.