'Panama Effect' keeps West Coast guessing
The benefits of the expanded Panama Canal might bypass US west coast ports completely. Credit: De Vern
What might be called the Panama Canal Syndrome is keeping port planners and executives on the alert over the effect the widened canal will have on US West Coast port traffic.
Says Wilbur Smith Associates economist Paul Bingham: "There is probably a general consensus of a reduced impact than was previously thought, but there are those who have remained cautious about assumed additional diversion and market share shifts from the new set of larger locks all along.
"I think the Panama Canal is careful to not claim they are going to compete to take much market share from others, such as the North American railroads or West Coast North American port/rail systems. The Canal Authority management has been clear for a decade that the primary reason to expand the Canal was that they were approaching maximum annual throughput capacity and therefore felt both pressure and opportunity to expand to provide needed additional transit capacity.
"If they didn’t expand," continues Paul Bingham, "they would lose market share as trade volumes grew but their capacity remained fixed, forcing cargo elsewhere. The expansion was not characterised in their own planning just as an attempt to capture new market share, but to hold on to existing market share. Clearly the financial risks they undertook were substantial, and provide ongoing pressure after the new locks are completed to gradually continue to raise tolls."
This is largely the view of port management themselves. Linda Styrk of the Port of Seattle sums up the thinking: "The cost structure will largely determine the pattern, with the inter-modal aspect having to be taken into account. We don't yet know what the tolls will be and how they will be structured – they will obviously play a part in determining how much traffic goes through there."
She sees Panama also as a help for the "four-corners strategy" of shippers and traders today, which avoids too much reliance on a single port. "Shippers use gateways in different regions, which allows them to plan logistics more efficiently and greatly reduces the risk of hold-ups and traffic dislocation. So, Panama helps to spread out the traffic load."
Some port executives speculate that the recent tie-up between the ILWU dockers' union – which controls the whole West Coast – and the Panama Canal pilots could add to shipping costs. They are wary about the ILWU persuading the pilots to hike up wages and pilotage fees. This view is discounted by others, who see the link as a political gesture by the ILWU to claim international status.
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