Panama Canal a possible threat to California container traffic

By: | at 08:00 PM | Channel(s): International Trade  Ports & Terminals  Liner Shipping  

By Leo Quigley, AJOTThe planned opening of the $5.25 billion expansion of the Panama Canal is expected to create a sea change in global traffic patterns, with California potentially losing container traffic to Eastern US and Gulf ports.
This, at least, is the opinion of people who watch California’s container business, such as the Pacific Merchant Shipping Association and the West Coast Waterfront Coalition who see new opportunities for Eastern ports, not only as a result of the expanded Panama Canal, but also because of the growth in trade with the Indian Subcontinent.
Trying to determine just how traffic patterns will change and what volumes will be gained or lost seems to be a difficult, if not impossible, task.
What does appear certain, however, is that America’s rail lines between California ports and Eastern markets are going to have to pick up the pace if West Coast ports are going to have a chance to compete when the opening occurs in 2015.
“We’re concerned that it (the Panama expansion) places a lot of additional competitive pressure on West Coast ports,” Mike Jacob, vice-president of the Pacific Merchant Shipping Association (PMSA), told AJOT. “That might ultimately lead to a long-term diversion of cargo.
“It’s not going to be a wholesale move away from ports, but the competitive pressure it will put on rates and performance certainly has us worried.”
Jacob said it’s difficult to predict what the situation will look like in five years when the expanded canal is scheduled to open “We know that prior to the recession we were losing volume to other ports on the West Coast and to the Gulf and the East Coast,” he said.
“We need to compete with the canal and that means making investments in our infrastructure off-port.
“We don’t think that port infrastructure is lacking or inadequate. Most of the constraints on the intermodal supply chain are off-port infrastructure.”
Jacob said the lack of near- dock rail capacity in Southern California, not having the amount of double tracking that’s needed and not having sufficiently improved the capacity of the highway system are greater constraints to meeting the competition that the larger canal will bring when compared to the need for additional infrastructure at California’s ports.
“We have concerns about port investment, but in the short term the real constraint isn’t whether we’ll have capacity at the ports since our volumes are away off their highs. But, in the long term, we do have a problem with ensuring that West Coast ports are positioning themselves to grow.
“A lot of that, unfortunately, has become an issue because of fees and pricing and the perception that Southern California ports don’t care about cargo,” he said.
The PMSA, he said, is working to encourage California’s major ports, primarily Long Beach and Los Angeles, to refocus on their customer base.
“Everyone in our business - we represent port tenants and marine terminal operators – has the same bottom line. We all do better when we have more cargo.
“The softening economy has certainly made people realize that there’s no lock on cargo flows.
“You can’t take your customers for granted,” he said.
Jacob said that when the new locks open it will be ultimately up to shippers to decide what their supply chain should look like.
“To a large degree there’s not a lot that the ports of L.A. and Long Beach can do,” he said.
The only thing that could make a difference, Jacob said, is establishing themselves as ports where transactions are made more effective and efficient.
Many of the projects that would accomplish this, such as near dock rail and getting rid of bottlenecks on the rail network, have been in the drawing board for a long time, he said.
“Those aren’t new projects. Those are projects that have been ongoing and debated for years in L.A., Long Beach and Oakland.”
Jacob was not particularly critical of the railroads and said both Union Pacific and BNSF are pushing hard to build key near-dock rail projec

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American Journal of Transportation