International trade is anticipated to expand by 4.5 percent this year and 5.2 percent in 2015.(1) This is supported by the world’s growing middle class, whose numbers are projected to rise by one billion by 2020, and whose purchasing power will more than double by 2030.(2) But will America’s ports be able to handle the increase in volume transported by larger Post-Panamax vessels?

In The Spotlight

Today, Post-Panamax vessels, which can handle up to 12,600 TEUs (twenty-foot equivalent unit: a typical shipping container 20’ x 8’ x 8.5’) comprise 16 percent of the world’s container fleet and account for 45 percent of the fleet’s capacity. By 2030, they are expected to make up 27 percent of the world’s container fleet and account for 62 percent of its capacity.(3)

By undertaking its current expansion, which was scheduled for completion later this year but will be delayed, Panama will double its canal’s capacity. “The resulting economy of scale advantage for larger ships will likely change the logistics chains for both U.S. imports and exports,” says the U.S. Army Corps of Engineers. And, “the certain injection of successive new generations of Post-Panamax vessels into the world fleet could be a game-changer for the U.S. over the long term.” In fact, the U.S. Army Corps of Engineers continues, the “deployment from Asia to the East Coast will begin to closely resemble the fleet mix calling at the West Coast.”

Last year the U.S. Army Corps of Engineers ranked North American Ports’ Post-Panamax readiness at 23rd globally in infrastructure competitiveness.

Unfortunately, last year the U.S. Army Corps of Engineers ranked North American Ports’ Post-Panamax readiness at 23rd globally in infrastructure competitiveness. The American Society of Civil Engineers gave American ports a grade of “C.”

To handle Post-Panamax vessels, what needs to be done? Dredging and upgrading berthing areas to 50-foot depths is required, as well as replacing gantry cranes with cranes having the height and reach to unload taller and wider container vessels.(4) Plus, other infrastructure improvements, including the raising of surrounding bridges, need to be made in some cases.

The United States has over 300 ports of various sizes and functions. What is the status of the largest ports on the West, East and Gulf coasts?

According to Collier International, a leader in global real estate and development, as of December 2013, eight North American ports were Post-Panamax ready, three ports were in the process of completion, and others were projected to not be Post-Panamax ready before 2015. Ranked by 2013 TEU volume, they include the following:

Port and Status

La/Long Beach - Post-Panamax ready

New York/New Jersey – in process

Savannah – not before 2015

Seattle - Post-Panamax ready

Norfolk - Post-Panamax ready

Houston – in process

Oakland - Post-Panamax ready

Charleston – not before 2015

Tacoma - Post-Panamax ready

Port Everglades – not before 2015

Miami – in process

Port Prince Rupert, Canada - Post-Panamax ready

Jacksonville – not before 2015

Portland – not before 2015

Tampa – not before 2015

Baltimore - Post-Panamax ready

Mobile - Post-Panamax ready

Philadelphia – not before 2015

New Orleans – not before 2015.

Surprising to many, container traffic through the Suez Canal to American East coast ports is growing at a rate faster than current container traffic via the Panama Canal.(5) Why? Despite security risks, Asian shippers are increasingly using the Suez Canal as a hedge against potential Panama canal rate increases imposed by the Panama Canal Authority to recover expansion expenses.(6)

Plus, if a significant reduction in the cost of the water route is achieved by going through the Panama Canal instead of unloading goods at West coast ports and transporting them by truck or rail eastward, an increasing portion of freight traffic likely will shift from calling at West coast to East coast ports. As a result, East coast ports stand to gain business.

In addition to the factors noted above, labor issues may arise that could threaten slowdowns at certain U.S. ports this year. Thus, in June the International Longshore & Warehouse Union master labor agreement expires. In addition, West Coast ports face possible labor issues centered around port automation and job loss concerns.(7) As a result, it is important to maintain shipping flexibility.

According to the American Association of Port Authorities, “The nation’s seaports are significant drivers of our economy, with more than 13 million jobs dependent on the cargo that moves through ports. Over one quarter of U.S. gross domestic product is accounted for by international trade, and 99 percent of overseas trade moves through America’s seaports.” The importance of American ports cannot be understated.

In 2042, U.S. imports and exports are estimated to reach $12.4 trillion and $14.8 trillion, respectively.(8) This reflects an increase of about 440 percent and 850 percent over 2012, and interestingly, an export surplus beginning in 2022. Unless America’s ports are continuously improved, the long-term impact will affect American businesses and consumers coast to coast.

Footnotes: 1. International Monetary Fund. 2: Ernst & Young. 3. U.S. Army Corps of Engineers. 4. Colliers International. 5. Ibid. 6. Ibid. 7. Ibid. 8. IHS Global Insight. This article appeared in International Insights, a Fifth Third Bank publication, March 2014.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.

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