Cautions aside, Savannah port expects more cargo after bigger Panama Canal opens June 26
By David Pendered
Note: This is the first of two stories that look at improvements to the Port of Savannah. Coming Tuesday: Harbor upgrades 100 years ago.
Editor’s Note: This story was updated Tuesday with additional information from GPA.
Despite cautionary remarks in a report by the real estate company CBRE, Georgia’s ports expect to handle more cargo and add more to the state’s economy once the expanded Panama Canal opens this month, Griff Lynch, incoming executive director of the Georgia Ports Authority, said Monday.
“We think it will be positive for Georgia ports and the East Coast,” Lynch said of the expanded canal. “We [Savannah] are the largest trading partner with the canal today. We think that’s going to grow.”
It’s almost heresy to suggest that the expanded Panama Canal won’t translate to a trade bonanza for East Coast ports.
The canal is to handle ships that carry almost three times the amount of cargo as existing ships – up to 13,000 cargo containers by some counts, compared to current capacity of about 5,000 containers per ship.
These figures contributed to a federal ports expansion program. It includes the $700 million deepening of the Savannah Harbor. Another $2.9 billion program in New York/New Jersey includes $1.3 billion job to raise the Bayonne Bridge by 65 feet, and $1.6 billion to deepen the channels to 50 feet, according to a report by joc.com.
Despite these investments and the trade expectations they represent, CBRE issued a cautionary advisory on the impact of the widened canal. And CBRE isn’t alone – the Journal of Commerce (joc.com) said as much in a recent report.
CBRE’s analysts evaluated the capacity of major U.S. ports in the 2016 edition of its Seaports and Logistics Annual Report. The report observes:
- “Conventional wisdom says that the expansion will increase the amount of cargo and the number of ships that call on eastern U.S. ports from Asia. …
- “However, for cargo that is currently landing on the West Coast and is ‘discretionary cargo’ (goods that have a final destination outside of the port market or region), the outlook is less certain. The biggest disadvantage of shipping through the Panama Canal is a slower delivery time; cargo shipped through the canal can take up to 10 days longer to reach the East Coast than cargo moved on intermodal routes from West Coast ports [by moving cargo from ships to railroads].”
GPA officials haven’t expressed a public opinion on whether the expanded Panama Canal will be a bonanza or a sleeper. Instead, they’ve said they do anticipate a slow but steady increase in trade over time.
Lynch noted, for example, that some shippers who shifted from the West Coast to Savannah during the labor dispute continue to use Savannah. This may not represent a windfall. But it shows that the market is choosing to retain a presence in Savannah despite the resolution of labor issues at California ports.
“Customers that diverted to Savannah last year enjoyed the experience they had,” Lynch said. “Good service. High productivity. Seamless movement from ports to highways and rails in Georgia and beyond. They want more of that. They’ve determined it’s not prudent to have all their eggs in one basket.”
A report by joc.com said East Coast ports have been handling the Post-Panamax container ships for years. The trade publication expressed this caution:
- “[W]hen the new locks finally open this June, more than two years behind their original schedule, the event may prove anti-climatic. Post-Panamax container ships that the new locks were built to handle have been calling at East Coast ports for the last three years from Asia via the Suez Canal.
“The ships on the Suez route began arriving at East Coast ports well before many of them had completed deepening their harbors; ships could only call at ports twice a day at high tide or after they had unloaded enough cargo to lighten their draft at ports with deeper channels before calling ports with shallower drafts.”
Lynch responded specifically to the CBRE report by observing that time isn’t the only factor in the calculations used by shippers. Cost is a factor. So is the risk of uncertainty over cargo getting stuck at a port because of labor disputes, or because of congestion on roads or rails.
Lynch observed of the CBRE analysis:
- “Today, there’s a line of demarcation for serving places like Memphis and Chicago. It’s very easy to see that, from a time standpoint, it’s definitely faster to service those locations via West Coast ports. However, time is not always the key driver. There’s also cost.
- “At the end of the end of the day, with the expanded canal and ships, that translates to lower ocean freight costs. We’ll likely see an increase not only in the major place we service today, Atlanta, but potentially Chicago and the Ohio Valley, which are key logistics centers.”
Of the existing traffic through the Suez Canal, Lynch noted that history suggests shippers will return to the Panama Canal once it is fully able to transit large ships. Before construction started, about half the ships that called on Savannah came through the Panama Canal and 30 percent came via the Suez Canal. The numbers are now reversed. Lynch expects them to revert.
- “Today, a large percentage of Suez [traffic] has a route that calls on New York, Norfolk, Savannah, and back through the Suez Canal. When you have Panama service, you call Savannah, Norfolk, New York, and back south. That’s the most efficient way to move.
- “What happens with the Panama Canal expansion will be a shift, and maybe even a balancing of vessels for the Panama Canal and Suez Canal. The capacity for the Georgia port to take advantage of first in, last out, increases. For this reason, we think we’ll benefit. … Geographically, we’re in a very good position.”
The expanded Panama Canal is to open June 26, according to joc.com. This is the latest target for a project that was to open in 2014, in commemoration of the 100th anniversary of the manmade trade route.
Delays have included disputes over cost overruns and leaks in a concrete structure that is to hold back water that comes from the Pacific Ocean.