The 2020 Mid-Year Economic Update_long

Canal Expansion to Ease Supply Chain Woes

Wider Panama Canal will give distributors more options for imports.
Eric-Smith-84x84

Distributors who have grown weary of labor disputes slowing down trans-Pacific shipments into West Coast ports will have a new option for their supply chains when the expanded Panama Canal opens next year.

The canal will be able to handle much larger ships than it can now, potentially helping East Coast ports gain 10 percent share of container traffic from West Coast ports by 2020, according to How the Panama Canal Expansion is Redrawing the Logistics Map, a new study by The Boston Consulting Group and C.H. Robinson.

West Coast ports now receive two-thirds of container flows from East Asia, with much of that cargo loaded onto trains and then railed to intermodal facilities throughout the country – often as far east as Chicago, IL, and Memphis, TN. Once the Panama Canal can accept wider ships, it will allow shippers to reroute those vessels through the canal to East Coast ports.

This will have a profound effect not only on companies' supply chains but also on the U.S economy. The increase of cargo volume on the East Coast will be the equivalent of "building a port roughly double the size of the ports in Savannah, GA, and Charleston, SC," according to the report.

"The $5 billion expansion will permanently alter the competitive balance between ports on the East and West coasts," according to a release on the report. "With global container flows rising, West Coast ports will still handle more traffic than they do today, but they will experience lower growth rates and their market share will likely fall."

The Panama Canal expansion also bodes well for distributors, many of whom have listed West Coast port slowdowns, which are caused by frequent union labor issues, as a pain point for their transportation and inventory management processes.

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