Panama Canal expansion may be “game changer” say supply chain analysts

As the 2014 deadline for the completion of the $5.25 billion Panama Canal expansion project gets closer, the ramifications it will have on supply chains and industrial real estate are abundant, according to the findings of a report issued by global real estate firm Jones Lang LaSalle (JLL).

In the report, JLL describes the Panama Canal expansion as a “global game changer” for a number of reasons.

These include:

*higher oil prices driving carrier lines to bring “Post-Panamax” vessels into service now.
*lower shipping costs per twenty-foot equivalent unit (TEU as a result of larger ships transiting the new set of locks.
*the re-setting of trade routes as Asian companies gain better access to not only East Coast U.S. markets throughout the Americas but also across the Atlantic.

Logistics Management – a sister publication of SCMR—shared these observations in a preview presentation of this report earlier this year.

Another component of the Panama Canal expansion, the report noted, was that cargo could more viably reach the U.S. East Coast via all-water routes and then be transloaded west to demand centers in the Midwest as far as Dallas.

“There has been this invisible line running north and south around Memphis to which product destined for markets west of that have traditionally come through the Ports of Los Angeles, Long Beach, Tacoma, or Seattle,” said John Carver, head of JLL’s Ports Airports and Global Infrastructure Group. “And markets east of that line have found opportunities coming through an all-water route through the existing Panama Canal.”

And for shippers looking to position their facilities and optimize their distribution networks, Carver explained there will be more viability in East Coast port options, which will open the door for real estate development and vertical facilities and transactional work in those areas on the Eastern seaboard.

This development, though, is not necessarily a threat to the Ports of Los Angeles/Long Beach, said analysts, because that market will continue to grow from other trends in the industry and the 40 million population base it serves within a one day drive of those ocean cargo gateways.

For related articles click here.

SC
MR