US Ports Prepare for Convergence of Changes

Cargo Ship
Photo by Simon Greter via Wikimedia Commons

US ports are preparing for two major events that could change the dynamic of where the largest cargo container ships make port calls, according to a leading industry analyst.

Two events — the completion of the Panama Canal expansion and an anticipated labor action by West Coast dock workers — may mean big changes in the landscape of where the biggest ships end up, Neil  Davidson, senior analyst of ports and terminals for Drewry Research told Supply Chain Management Review.

When the $5.25 billion expansion of the Panama Canal is complete later this year, ports up and down the East Coast will be able to accommodate the super-sized container ships — known as “Panamax” vessels — which can carry nearly triple the capacity of traditional cargo ships, but require deeper trenches and upgraded port facilities.

Potential Shift in Balance

In anticipation, ports from Miami to Maine are expanding their capacities so that these bigger, more efficient vessels from China and other major Asian trade partners can make port calls there.

“East Coast US ports are hoping to gain share from the West Coast ports but they won’t give it up easily,”  Davidson said. “Plus, it’s not just about port capacity, but also about inland/intermodal capacity.”

If larger cargo containers chose to make port calls at the East Coast, that will have an impact on how the cargo they contain are delivered to the various distribution centers and end users. That could mean boosts in rail and truck freight in the eastern half of the country as well as in the Gulf of Mexico ports.

All Eyes on the West Coast 

Meanwhile, relations between members of the International Longshoremen and Warehouse Union and dock operators along the West Coast have heated up as both sides prepare for what are expected to be very tough new contract negotiations later this year.

All this adds up to uncertainty for dock operators on both coasts as cargo carriers look for new alliances and revise their port calls, according to Davidson.

“However, it is in their interest to serve as many port calls directly as possible in order to offer the bet service to cargo owners,” Davidson said.

Major carriers will still call at key cargo generating ports, but they may not have to make port calls as often. One side effect of this could be big spikes in port traffic at times.

“So in this sense there may not be much change to the list of ports called, but bigger ships do mean reduced service frequency, or at least less port calls per year, leading to more peaking of port volumes,” Davidson said.

Port operators and cargo carriers also will be closely following labor negotiations on the West Coast because if they break down and West Coast ports shut down — as they did for eight days at the Port of Los Angeles and Long Beach in 2012 — it could mean more port calls along the East Coast and the Gulf.

“I imagine that most shippers, through past experience of similar issues, have contingency plans in place for diversions if necessary,” Davidson said. “They will adopt a wait and see approach though.”