Bill Virgin: Panama Canal’s day of history also has Northwest implications

So long has the Panama Canal widening project been discussed, debated and used as threat and warning that the general public might be forgiven for forgetting that some day actual boats might sail through an actual waterway.

As of this week, they will.

The Panama Canal Authority says the container vessel Cosco Shipping Panama, sailing from Greece, will be the first to transit the canal. That is scheduled to be today, June 26.

As container ships go, the Cosco Shipping Panama’s capacity of 9,472 TEUs (20-foot equivalents, the standard measuring stick for such things) seems almost puny compared with some of the behemoths now out there, at 18,000 TEUs.

Those won’t fit even the expanded canal, but the class of ships known as NeoPanamax (roughly up to 13,000 TEUs) will, so now we get to find out whether all those dire predictions on the effect of the new canal prove out.

Predictions such as this, from Boston Consulting Group and C.H. Robinson: “As much as 10 percent of container traffic between East Asia and the U.S. could shift from West Coast ports to East Coast ports by the year 2020.

“Small percentages translate into big numbers in container traffic on high-volume lanes between East Asia and the U.S.,” the report says. “This trade represents more than 40 percent of containers flowing into the U.S. Rerouting 10 percent of that volume, therefore, is equivalent to building a new port roughly double the size of the ports in Savannah and Charleston.”

The effects: “The larger ports on the West Coast will experience lower growth rates, altering the competitive balance between West Coast ports and East Coast ports. (With global container flows rising, West Coast ports will still handle more containers than they do today.)

“West Coast ports currently receive two-thirds of container flows from East Asia, with much of that cargo moving by rail and truck as far east as the Ohio River Valley, about three-quarters of the way across the U.S. But once the big, efficient ‘post-Panamax’ container ships begin passing through the wider, deeper canal, the shipping dynamics will change.

“For shipping to many destinations, using West Coast ports will still be the fastest option — but it won’t necessarily be the cheapest. For price-sensitive cargo that is relatively expensive to move, routing shipments through East Coast ports to inland destinations will become more cost competitive and increasingly attractive.”

It’s worth keeping in mind that that report was issued a year ago, before the great swoon in global shipping and the resulting drops in volumes, rate slashing, consolidations among shipping lines and suspended orders for new vessels. Those can’t be written off as temporary effects; even if global shipping volumes recover and shipping lines collect revenues that allow them to at least break even, the mergers and capacity reductions will be much longer lived, if not permanent. And those “even ifs” look to be a ways off. Sample headline from the shipping-industry news source Journal of Commerce last week: “Trans-Pacific peak-season surcharge postponements point to weak demand.”

But the Panama Canal expansion project will have an effect whatever the condition of the industry, which makes it a local news story.

The BCG-C.H. Robinson report was relatively upbeat about prospects for the ports of Tacoma and Seattle: “On the West Coast, Oakland and the Seattle-Tacoma cluster will likely hold their own in most scenarios. The Oakland port has a strong local market in the Bay Area, and Seattle-Tacoma is generally the best complex to serve the Pacific Northwest, playing a unique role in providing access to the upper Midwest via rail.”

The analysis didn’t mention that the ports to the north, Vancouver and Prince Rupert, can do the same thing. That’s one more factor, or competitive headache, for the ports to consider as they figure out what properties to invest in and which to divest. Seattle in particular has launched a review of its real-estate portfolio, and has made noises that with Terminal 5 upgraded to handle the biggest of the container ships, some of its other waterfront properties might be repurposed.

The Panama Canal expansion could prove to be a bust in terms of shaking up Asia-North America shipping patterns, or it could have far more influence than what’s been predicted to date. It could be a huge problem for L.A./Long Beach but cause nary a ripple in Puget Sound, or vice versa, or both could be hurt or neither. But once the first ship is officially through, the years of conjecture are done with. Now we’ll find out for sure.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

This story was originally published June 25, 2016 at 12:58 PM with the headline "Bill Virgin: Panama Canal’s day of history also has Northwest implications."