Panama canal expansion: Managing profits and supply chain

The decision on widening of Panama Canal was preceded by several years of research on economic feasibility, environmental and technical aspects. Now the project is approaching its completion and progress to date is estimated at 89.9%.

It is estimated that the expansion of the Canal will allow passage of vessels with 13,000 TEUs capacity as opposed to current 5,000 TEUs.

The main focus of carries trying to build up new services to avail of the opportunity is the route from Asia to US East Coast. According to Drewry’s Container Insight this trend is brought about by rapidly growing traffic to USEC and decline of volumes received by USWC. At a certain point the freight rate premium started levelling out, but mostly due to large capacity of the USEC and normalization of USWC operations. Significant increase in transpacific traffic with 37 vessels of 10,000 to 13,000 TEUs can inflate the shipping services market in the region lead to carries losing their premiums, even with growth in Asia – US Gulf Coat demand.

Inbound Logistics notes that apart from the benefit of moving larger volumes at lower prices, the growth of volumes will put pressure on existing supply chain infrastructure and demand its expansion and improved efficiency. There is a limit in the number of new distribution centres that can be built in proximity to the ports; the challenges of transporting goods within the country with include the need for multimodal transport routes. Considering expected cargo volumes the importance of railroads in logistics management is bound to increase. To accommodate handling of larger vessels a number of ports will have to enlarge and deepen their channels to make the most of this remarkable shift in trade lanes.