Griffith V. Lynch, Executive Director, Georgia Ports Authority

https://www.gaports.com
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Griffith V. Lynch

The complete impact of the expanded Panama Canal and the larger vessels it accommodates is still developing. However, long-term indications are that the service frontier for US East Coast ports will shift westward, especially for nonperishable goods.

The region stretching from Southeast Texas, through Memphis, St. Louis, and Chicago can be served over much shorter rail distances from the hub ports on the East Coast.

To make full use of relative cost reductions on the water, East Coast ports and their rail providers must establish intermodal operations moving unit trains from container terminals to these battleground destinations.

While it stands to reason neo-Panamax vessels lower overall transportation costs to the mid-continent, a second issue must be settled before the economics are clear.

Artificially low container slot costs — from an overabundance of container ship capacity — make it difficult to determine the true benefit of the Panama expansion. Through consolidation, the market is correcting that overabundance, and we should soon see more clearly the positive impacts of Panama’s larger locks.

In October 2016, NYK Line, MOL, and “K” Line announced they will establish a joint venture to integrate their container shipping businesses. Their combined fleet capacity is 1.4 million TEUs, or 7 percent of the global total.

This consolidation comes on the heels of Hanjin’s bankruptcy, Hyundai’s receivership, CMA CGM’s acquisition of APL, Hapag Lloyd and United Arab Shipping Co.’s consolidation, and the merger of China Shipping and Cosco. These changes dramatically alter the landscape going forward.

Shipping lines joining forces or acquiring competitors to rebalance container ship capacity should result in greater long-term stability and continuity in services and rates. The interplay of larger vessels, larger alliances — and the synergies they will find at gateway ports equipped to handle larger exchanges — will be a major trend to watch this year.