Even more on Port Expansion
This morning I have a link to the LA Times. In Vancouver, the Port hired a local firm, Intervistas (spun off from YVR some years ago) to do a selling job for its ten year capital expansion plan. In LA they looked at the broader picture
a recent report by London-based Drewry Supply Chain Consultants, a maritime industry research firm that has about 3,000 clients in more than 100 countries. West Coast ports will see increased competition from the Panama Canal, which is undergoing a bigger-than-expected expansion due to be completed in 2014, Drewry said. In addition, rising Chinese labor costs will push some manufacturing back to Mexico and South America.
Irritatingly, the Times does not provide a link to the original report, and anyway I am writing this in a hurry. I am supposed to be somewhere else soon.
The main hook to the story is the expanded Panama Canal
As a sign of the new esteem with which the project is now regarded, Panama Canal Authority Administrator and Chief Executive Alberto Aleman Zubieta was honored Monday with an excellence award at the Asia-Pacific Economic Cooperation Summit in Lima, Peru, for “successfully moving the canal from a profit-neutral utility to a business-oriented enterprise.”
Now, Drewry says, West Coast market share is about to take a serious hit, “possibly forever,” from a “rejuvenated, aggressive and soon-to-be widened Panama Canal” that will have locks capable of handling cargo ships carrying as many as 13,000 containers — much larger than the 8,000-container ships it was originally expected to accommodate.
Drewry isn’t the only one who thinks so.
“With the ability to handle most of the world’s largest ships, the Panama Canal will begin to enjoy better economies of scale than its primary competitor, which is the transpacific intermodal route from Asia to the West Coast and to the rest of the U.S. by rail,” said Asaf Ashar, head of the Washington office of the University of New Orleans’ National Ports and Waterways Institute.
“It’s cheaper to move cargo by ship than it is to transfer it to rail and go overland,” Ashar said. “The logical conclusion is that market share will be lost.”
So there are going to be new routes opened up to the north and the south. The trade itself is likely to decline as the low cost manufacturing advantage China once enjoyed is lost. Moreover there is going to be a shortage of oil in future. The current drop in price is not going to last very long, so the marine mode will become more competitive over road and rail, simply because you get more ton miles per barrel of oil in a big ship than either land mode.
And, of course, none of this is news to regular readers of this blog