Keep an Eye on the Ports

In Is it sunset for state’s seaports? (Sacramento Bee, Jan. 29, 2012) Jock O’Connell provides a great evaluation of the potential impact of the expansion of the Panama Canal due to be completed at the end of 2014.

California has long enjoyed considerable economic benefits from its role as the nation’s principle gateway for trade with Asia and the Pacific Rim.  The ports of Los Angeles and Long Beach are the 1st and 2nd busiest ports in the nation (measured by TEUs) and the port of Oakland ranks 6th.  The direct and indirect economic benefits of these centers are substantial and have risen significantly mainly from the growth of leading emerging economies, such as China, India, and South Korea (see chart below).

Some highlights from the article,

  • Some fear that the expansion could result in “a massive diversion of transpacific shipping from California’s maritime gateways to seaports along the Gulf of Mexico and the Atlantic Seaboard”
  • According to LAEDC, Southern California ports support 500,000 trade-related regional jobs, and and the Port of Oakland estimates that it supports 73,000 jobs in Northern California.
  • The impacts, though, won’t be one-sided.  In addition to lost cargo “California ports could expect to benefit from an increase in the volume of goods arriving by sea from Europe, Africa and South America” and “long-term forecasts anticipate a steady increase in seaborne trade between North America and Asia”
  • “infrastructure enhancements … would help safeguard the future of California’s seaports”

(Read the article)

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1 Comment

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One response to “Keep an Eye on the Ports

  1. I think he has it right. The following points are critical in this regard:
    1. The canal is designed for Class D ships, the largest at the time of the canal expansion project design. There are now Class E ships which are too large for the canal, but significantly reduce sea costs.
    2. Ports such as Jacksonville, Savannah and Charleston (and even Norfolk) are relatively small and are not near the large population centers. The largest cost of moving goods from port is the cost of loading and unloading onto a rail car. With the new intermodal investment in the ports of Long Beach and Los Angeles, there is no advantage to going to the Southern Ports except for a savings of a few rail miles (the least expensive part of rail transport). In exchange for that savings, the shipper has to have at least an additional week in transit at additional shipping and insurance costs, inventory carrying costs, and on water risk.
    3. Because transit time is longer, purchasers have to order sooner. Moreover seasonal shipping for Christmas and back to school has to contend with hurricane season and winter storms in the Atlantic and Gulf.
    4. If European shippers use the Panama Canal to avoid the pirate infested waters of the Somali Coast and the Straights of Malacca then there will be potential delays getting through the canal.
    5. Economies of scale in the distribution of goods.

    So, if Los Angeles, Long Beach and Oakland, and to a lesser extent the smaller ports such as Stockton remain competitive with infrastructure and pricing there should be very little diversion with the wider canal. One should expect the largest importers to maintain capacity in the Southeast which they can use for trans-Atlantic traffic and which gives them an alternative to West Coast Ports in the event of a labor dispute, but that will only affect the size and not the sign of the growth of traffic through California ports.

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