Source: adapted from G. Arnold (2009) “Global Supply Chain Trends and the Impact on North American Distribution Markets”, Talking Freight Seminar, US Department of Transportation – Federal Highway Administration.
Containerized transportation in North America is facing changes that are impacting the volume, the usage of gateways and intermodal options to service the hinterland. Initially, the growth of the transpacific trade had negative impacts on the market share of East Coast ports since the development of Asian outbound logistic chains and the efficiency of intermodal rail favored the use of West Coast ports to service the North American hinterland. However, several emerging trends are shifting this equilibrium:
- Routing options. For transpacific trade, there are several routing options to service the East Coast, from the landbridge to all-water routes through Panama or the Suez Canals. The intermodal option takes about 18 to 20 days to link Shanghai to Chicago, including 13 to 14 days of maritime shipping and 5 days of rail. A few uncertainties have emerged about the capacity and reliability of landbridge corridors, notably congestion and port and rail labor issues. For supply chains, reliability is commonly a factor as important as time and cost. Supply chains can accommodate longer transit times through warehousing and frequency adjustments, but unreliability is more difficult to cope with. While the all-water route from Shanghai to New York would take about 26 days, the intermodal option would take 22 days while using the Suez Canal would take about 28 days.
- New routing options. In addition to existing options, two new options to access the North American inland market have come online; Prince Rupert (supported by CN) and Lazaro Cardenas (supported by KCS). From a transit time point of view, the Prince Rupert option appears advantageous, taking about 16 days to reach Chicago along an uncongested rail corridor, entirely controlled by CN. The Lazaro Cardenas option is also attractive because of its proximity to the commercial trade of the South American west coast (e.g. Chile, Peru) and as a gateway to Mexico City and the American heartland through Laredo and Kansas City. KCS has made substantial investments with new intermodal yards at Lazaro Cardenas and in Kansas City.
- Decline in the intermodal share. There has been a significant drop in the share of intermodal rail servicing the East Coast to the advantage of the Panama Canal route (all-water route). In 1999, intermodal rail accounted for 86% of the container traffic between Northeast Asia (China, Japan, and Korea) and the East Coast, while the Panama and Suez canal routes respectively accounted for 11% and 3% of total container traffic. In 2010, the share of intermodal rail dropped to 30%, while Panama and Suez all-water routes accounted for 45% and 25% of the total traffic. By 2017, the share of intermodal rail dropped further to 22% while the share of the Suez Route increased to 33% of all container trade. The main factor behind this radical shift was that transpacific trade growth made direct all-water services more attractive from economies of scale and frequency of services perspective. There is enough volume to justify inter-range services between a variety of Pacific Asian and East Coast ports. Additionally, the introduction of post-Panamax containerships well above 8,000 TEU for transpacific and Asia-Europe (via Suez) services has relegated Panamax containerships (4,200 TEU) to more secondary routes. By 2016, neo-Panamax ships of about 12,500 TEU were able to transit through the expanded Panama Canal.
- Rectification of trade imbalances. The export-oriented strategies (neo-mercantilism) followed by several Asian economies are compromised. On the short and medium terms, the transpacific trade is likely to experience much less, if any, growth potential and accordingly limiting the growth prospects of West Coast ports. In addition, several supply chains are shifting to Latin America, which is changing the trade structure and its system of circulation.
- Expansion of the Panama Canal. The expanded capacity of the Panama Canal is likely to change the configuration of several maritime services to the US East Coast. With a capacity close to parity between the Suez and Panama canals, maritime shipping companies may expand circum-equatorial services using high capacity containerships in the 8,000 to 12,000 TEU range. East Coast ports could either be serviced directly with Neo-Panamax ships or through feeder routes from transshipment hubs in the Caribbean.