Ports hold back on Canal congratulations

Says John McLaurin of the Pacific Merchant Shipping Association: “It’s clearly going to offer people more gateways to choose from. The impact is subject to vigorous debate and we will see what happens in actuality.”

Phillip Sanfield, spokesman for Los Angeles, says the port “is not expecting a sudden shift of volumes through an expanded canal. Much of the diversion that could occur has already occurred, as large retailers have diversified their supply chains and added East Coast distribution centers.

“How much diversion occurs will still depend on rates and the importance of service times. Canal tolls will be set to get the best rate of return for the canal operator, not for the benefit of the retailers. The railroads, which have made very large infrastructure investments to handle West Coast intermodal cargo, will have to price competitively. It remains to be seen what the eventual market equilibrium will be.”

Jean Banker at Oakland says that Los Angeles will be the hardest hit. “For ourselves, we are neutral on the canal. We are well positioned geographically and while ports either side of us might be affected we should be OK. It will take some intermodal cargo from the west coast, there is no question. The real question is where the world economy will be – the situation could be that all traffic will go through the canal.”

Tong Zhu of Tacoma says: “Predictions about the impact of the Panama Canal expansion are difficult, because there are so many factors that impact cargo follow and trade lane usage (cost, reliability, service frequency, environmental costs, etc.). To be conservative, the Port of Tacoma’s long-term cargo forecast anticipates a 2% decrease in container volumes in 2014 due to some slight shifts in cargo volumes.”

These remarks are in contrast to predictions a year ago, when much more pessimistic forecasts were being made. Although port executives will not comment, there is a growing feeling that the canal will price itself out of the market because of the need to cover the costs of the $5bn project.