More cargo syphoned from US west to east coast via Panama as dredging opens eastern ports to big ships
 One of the more extraordinary things to happen in world shipping was the growing shift of the burgeoning Asian import volume from the US west coast to the east coast. This came about partly because of the expansion of the Panama Canal from a time when it could only accommodate the transit of panamaxes of 4,500-TEU to a time when it could accommodate "neopanamaxes" of 13,000-TEU. But other equally important factors contributed to the shift too.
The main takeaway from this development is that it continues steadily to this day as cargo statistics show. Nationally, according to Newark's Journal of Commerce west coast ports continued to lose market share in the Asia import trade, dropping to 64.2 per cent of total US Asian imports from 71.9 per cent in 2013. East coast ports increased market share to 31.3 per cent from 25.8 per cent, and Gulf Coast ports to 4.1 per cent from 1.9 per cent in 2013.
Even those who first planned to exploit this situation - chiefly the Port of Savannah even before then canal expansion work began, failed to fully appreciate what a good bet theirs was, thinking at first that the expanded canal, when once reopened in four years, would double capacity so that 9,000-TEU ship could transit. This was a time when the world's biggest box ship was the 14,000-TEU Emma Maersk, forever, it seemed at the time, consigned to the Asia-Europe trade because that trade had the only ports that could accommodate these new sea monsters.
What was not known - or widely appreciated - was that with a bit of tweaking, a ship's capacity could be increased without making changes to its fundamental structure - simply by adding another layer of containers on the weather deck.
Also under appreciated at the time was the growing role of the Suez Canal would play in ferrying Asian cargo not only to the Europe, long its traditional headhaul. At first, Suez factor was slight in Asian trade to the US east coast. But as ships grew bigger, and crew sizes grew smaller and slot costs declined, it became economical to move cargo via Suez, wayporting, that is transferring US east coast-bound boxes to smaller ships from Asia-Europe 10,000-TEUers plus bound for Europe's northern range. These boxes would shift efficiently at modern terminals at Colombo, Jeddah, Damietta, Tangiers and Algeciras to name only a few from the Indian Ocean and the Mediterranean. But as dredging of US ports continued in this period, the need for smaller ships diminished as deepwater access improved.
Not very long ago these smaller ships were the only ones that could access the shallows of US east coast ports, that were not too big to get under bridges that blocked the way to container terminals beyond them. But this became less true as the years rolled by.
To understand what happened, it is also important to have some sense of the geography of the United States, the world's richest single-nation market. Imagine first, the map from the west coast focusing on populous California, with sparsely populated Oregon and Washington State to the north. Looking east, there comes an array of sparsely-populated states, until Chicago, which most people take to be centre of the country. But if one looks at the map, it is not nearly half way across, but more like two thirds the way.
If one draws a line from Chicago south to New Orleans, one divides America into a consumer-poor territory west of the Mississippi Valley, and a consumer-rich territory east of it. In the east, the population gradually rises until one approximates the densities of western Europe, the world's richest multi-nation market overall.
In the old days, going back to 2000, there was little choice. Asia was pumping out products America wanted and they were being trucked or railed east from Los Angeles, Long Beach and Oakland. A smaller portion bound for northern cowboy country and Nebraska and the Mormon lands of Utah that went through the ports of Seattle, Tacoma and Portland.
In 2005, the Georgia Ports Authority that runs the Port of Savannah, on the Savannah River 18 miles from the Atlantic, started to promote the "all-water route", pushing ideas like "keep in on the water for free warehousing". The core of their belief was on the then current state of the Panama Canal and how much cheaper it would be to avoid costly overland road and rail haulage and put into Savannah directly, where it could transit over well-trodden and comparitively short hauls to consumer-rich population centres - certainly enjoying much shorter hauls than those offered from the US west coast.
Novel as the new promotion was, it lacked speed, but the Savannah salesmen switched ground. As Asian import volumes rose dramatically, they were less of a novelty and more of a staple. Forty years before, only the rich bought imported goods - but now everyone did as Asia provided the cheapest and best clothing and footwear for the money available anywhere.
For such commodities, as these goods were rapidly becoming, speed of delivery counted for little. What mattered was availability. Morever, the importers most responsive to Savannah's "all-water" blandishments tended to be high-volume big box retailers, the likes of Walmart, Target and Hotpoint.
From this sprung the "Four Corners Concept", which involved retail giants setting up massive distribution centres - or DCs - and using EDI (electronic data interchange), which was by now was a mature technology and utilised to it fullest extent. With efficient road and rail connections from the DC, speed of delivery by sea became irrelevant just as long the reservoir of goods at the DC-level could be maintained. The advent of online shopping was a DC-friendly development.
Of course, the "four corners" refers to the four corners of the continental US, or "Lower 48". But in truth the main focus was on those in the eastern part of the country where the customers were and where the cargo wanted to go.
In 2018, the ports of Savannah and Houston - another big beneficiary of the Panama expansion - saw the sharpest growth in imports from Asia among the 10 largest US ports.
Throughput of Asian imports expanded 11 per cent at Savannah compared with 2017, while Houston’s volume surged 19.6 per cent, driving more inbound goods from the west coast to the east.
Savannah’s 0.45 percentage point market share gain of east coast Asian imports contrasts with New York, which lost 0.32 percentage points of market share, and Norfolk, the third-largest east coast gateway, which lost 0.62 per cent percentage points.
Calfornia because of its heft and wealth, will remain prize gateway for Asian imports, but unless the largely empty states of Arizona, New Mexico, Nevada, Utah, Idaho and Wyoming begin to fill with consumers, the US west coast transshipment role is already diminishing as cargo is syphoned off through Panama and to a less extent Suez. |
