2016
Panama Canal expansion crossing the finish line:
As construction wraps up, what will affect its place in global maritime shipping?
As construction on the Panama Canal expansion nears its final
stages, it will do so in a global macroeconomic and logistics
environment that has become ever-increasingly complex. But what
will its impact truly be in the near-term?
And what factors will help influence its long-term
role in the eyes of shippers, carriers and the
ultimate consignees of cargo–and where they
decide to place their warehouse and distribution
operations–in the wake of expanded options
presented by the new set of locks at the Panama
Canal?
There are many factors to consider when it comes to understanding
the Panama Canal expansion through the lens of supply chains and
industrial real estate requirements–especially as they relate to the
occupiers of logistics space, be they retailers, 3PL’s or other
companies, and correspondingly for investors in warehouse and
distribution product.
IndustrialImpact series
Trends . Opinions . Our take
In a brief breakdown of complex and interwoven issues, the following
are a few topics that have important industrial real estate implications
for major markets in the United States.
Boosting speed-to-market
The Panama Canal will remain the faster all-water route from Asia,
still better than the Suez, and with larger ships passing through the
new locks, it will give an advantage to cargo needing to reach the
East Coast of the U.S.
Cost savings via the expanded Panama Canal
Competition for trade volumes among U.S. East Coast seaports is
expected to continue, and many have invested heavily over the past
few years in infrastructure and capital improvements.
And while it is still fastest for trans-Pacific cargo to be shipped into
West Coast seaports and transferred via rail and truck to reach the
center of the country and further east; it is expected that the
expanded set of locks will allow for new economies of scale that will
help to push down cost per TEU via Panama.
2016
Panama Canal expansion crossing the finish line:
As construction wraps up, what will affect its place in global maritime shipping?
It will take time before a beneficial shipping ‘bounce’ occurs
It is expected to take time in 2016 to recapture Suez traffic, and
cascading larger vessels and/or more services through the new set of
locks in Panama is not expected to occur immediately after the
expansion opens. Additionally, the expanded Canal is opening at a
time of global economic volatility, and at least of slowing growth in
many emerging markets.
Getting goods close to customers
With two-thirds of the U.S. population residing east of the Mississippi
River, the expanded Canal will supply shippers with another cost
effective option to reliably reach their customers. It won’t make sense
for all types of cargo, but it will have an impact on supply chains and
where warehouse and distribution operations are situated in the nearterm future.
A recent white paper by C.H. Robinson and Boston Consulting Group
posits that with the new set of locks in Panama, up to 10.0 percent of
container volumes to the U.S. from East Asia could shift to East Coast
seaports by 2020.1
Live from Panama: Rich Thompson and Aaron Ahlburn
As JLL covered in a white paper on the Panama Canal expansion from
the spring of 2011, the line of demarcation for discretionary cargo is
now shifting west–and with East Coast seaports already capturing
market share. And while recent labor strife on the West Coast and
unpredictable natural disasters in Japan and Thailand had an
influence, the new canal has also been, and will continue to be, a
catalyst as well. How U.S. site selection decisions and investment in
East Coast logistics real estate will change is a story that is still being
written, and won’t end anytime soon, even once the new set of locks
opens in Panama.
1
Wide Open: How the Panama Canal Expansion Is Redrawing the Logistics Map (June, December 2015)
Meeting with Oscar Bazan, Panama Port Authority
For more information on the expansion and how it affects your real estate supply chain, contact:
Rich Thompson
Global Leader – Supply Chain & Logistics Solutions
+1 773 458 1385
[email protected]
IndustrialImpact series
Trends . Opinions . Our take
Aaron L. Ahlburn
Senior Vice President - Industrial Research, Americas
+1 424 294 3437
[email protected]