When the announcement came that the Panama Canal was adding a third lock capable of handling the largest ships, the West Coast real estate community shuddered. Then the recession hit and the tallest giant, Los Angeles-Long Beach, fell the hardest as total containerized volume fell almost 40 percent at the depths of the 2009 recession from two years earlier.
Just when it appeared it couldn’t get darker, a reputable real estate firm released a report predicting a possible further 25 percent erosion of West Coast containerized market share that had already dropped nine percentage points since 2004. Panic was setting in among many real estate professionals along the West Coast.
Fast-forward to July 2010, just 12 months after that dire prediction and what has happened? Container rates in the Hong Kong-Los Angeles trade increased from $950 per 20-foot equivalent unit to $2,800. Volumes at all ports are up an aggregate 15 to 20 percent. Rail intermodal loadings have increased even more rapidly. And West Coast market share regained four percentage points of the nine percent lost last decade.
We now have a whole new ballgame. According to The Journal of Commerce, the recession has made the Panama Canal “game-changer” a thing of the past (“East Coast Reality Check,” Oct. 11). There are no more predictions that the opening of the third lock will have a serious effect on where shippers decide to route their freight.
On the contrary, we expect to see shifting demographics in the next 20 years, and not just the shipping patterns, affect where distribution centers are developed.
The Panama Canal expansion will present an opportunity to cut costs, but the opening is one small cog in the price wheel that makes up the bulk of the “shipper’s decisions.” Price and consistent delivery are the key drivers in those decisions. Today, intermodal still has the advantage.