US East Coast cannot go wrong
When Maersk Line’s giant 18,000 TEU container ships start hitting the water from next year, the future of East Coast ports will be brighter than ever.
The Panama Canal expansion that will be completed in 2014 (or maybe 2015) is often regarded as the game changer in Asia-US container trade. It will change the way Asia trades with the US, but not in the way most people think.
Most cargo that was going to shift from the traditional West Coast ports to the East Coast has already done so. Around the big import hubs of New York-New Jersey, Savannah and Charleston can be found giant distribution centres occupied by the world’s largest retailers. IKEA, Wal-Mart, Target, Home Depot, Hyundai, etc, all have significant investments on the East Coast with good rail and road connections to their major markets.
So don’t expect any sudden shift in container volume from LA-Long Beach to NY-NJ and the others when the new Panama opens up. Shifting gateways is a complex process that involves setting up and building warehousing and once established and viable, the business reaches a point where change becomes impractical.
Several ports along the US East Coast have been expanding their yards and deepening their channels and quays (or are expecting to receive funding to do so) so they can handle the larger container ships.
And here is the big issue – not the expanded canal but the fast expanding ships themselves. The absolute maximum container capacity of vessels that will be accommodated by the new and improved waterway is 12,600 TEUs.
As huge an improvement as that is over the 5,000-odd TEU ships that can currently use the canal, it will not be able to handle a sizeable chunk of the new container fleet.
None of the E Class Maersk vessels will be able to use the Panama Canal. In fact, there are more than 100 newbuildings scheduled to enter service by 2015 that will not be able to use the widened waterway.
Many of them will be deployed on Asia-Europe and the smaller ships will be cascaded down, but with so much large capacity coming into service there will be huge pressure to use the ships on Asia-US trades. Too big to go through the Panama Canal, the larger ships will have no option but to serve the US East Coast via the Suez Canal.
Several shipping companies already offer this route to shippers but it will be a growing trend that is good news for ports on the Eastern Seaboard as well as in Asia. The Suezmax vessels will require a strong feeder network around origin and destination ports to ensure their utilization remains high.
In these expensive fuel days of slow steaming, shippers have grown accustomed to extended sea voyages and provided the schedule reliability is there, they can easily factor in the longer transit.
Especially for ports in South China, the route makes sense. And the large vessels will be able to use ports in the Mediterranean, such as Port Said, as transshipment stops en route to keep those critical load factors up.