Ports on the east coast of the US will be become the chokepoint in Asia-US trade because they are years away from being able to accommodate the super-sized vessels running through the new locks of the Panama Canal.

“Before the Panama Canal was the bottleneck, now it’s the ports on the east coast,” Ryan Petersen, CEO of US-based freight forwarder Flexport, told fDi.

Advertisement

Thousands of Panamanians were in attendance on June 27 to watch the first passage of a ship carrying 9,000 containers through the $5.25bn set of locks at the canal connecting the Atlantic and Pacific oceans. The milestone event marked the end of a nine-year, problem-strewn expansion aimed at roughly doubling the canal’s capacity thereby easing interoceanic trade flows, which handles around 6% of worldwide shipping every year.  

Ports lying east of the Panama Canal scrambled to update their infrastructure to make room for the so-called new-Panamax vessels, which can carry up to 14,000 20-foot equivalent units (TEUs), but authorities along the East Coast have been slower than others in adjusting.

Works in progress

Work to raise the Bayonne Bridge straddling the entrance to the Port of New York, the largest on the East Coast and the country’s second largest after that of Los Angeles, will not kick off until 2017. The bridge can currently accommodate ships of 9000 to 10,000 TEUs, which is way above the previous Panamax limit of 5000 TEUs, but falls short of the new 14,000 TEUs Panamax limit.

Further south, the Port of Savannah in Georgia is in the process of deepening its harbour, which will take another couple of years. Its nearby competitor, the Port of Charleston, aims at kicking off dredging works next year and wrapping them up by 2019. Both ports are major gateways for goods bound for the east coast.

With work still underway, an expected rebalancing of Asia-US trades from the west coast to the east triggered by the enlargement of the Panama Canal will take years to materialise.

“Today there is a big area in the middle of the country where it is cheaper to bring a container from the west coast via rail,” says Mr Petersen. “But as the [new] canal opens, it’s going to be cheaper to send it through the canal and get it on the east coast.”

Once eastern ports are ready to handle new-Panamax vessels, they will be in a position to offer better rates to a whole belt of states running from Arkansas to Ohio which currently source their goods through ports on the west coast. Overall, eastern and Gulf Coast ports will be able to raise their share of Asia-US trade flows to 45% from the current 35%, Flexport estimates, with savings up to $1,000 per 40-foot container, depending on its final destination.