Global supply chain news update – Migration of sea-freight from West Coast Ports to East Coast set to increase

Shipping ContainersAlthough the fiasco of the West Coast container debacle is now dimming to become naught more than a recent memory, the damage as far as West Coast Ports are concerned has been done. The latest global supply chain news is that more and more ocean container loads are being rerouted to East Coast Ports and the consensus is that this is the start of a new trend, and with the opening of the expanded Panama Canal expected next year, the shift will be felt even more keenly.

According to statistics from Drewry Shipping, since January 2013, the total amount of sea freight originating from Asia and bound for East Coast Ports in the USA has increased in the order of 26%. Over the same period of time, the increase in traffic to West Coast Ports has been a meager 6%. The message for global supply chains is clear. East Coast Ports are tearing off big chunks of market share.

US Gulf Coast Ports benefit most

The biggest increase in growth of all is freight bound for US Gulf Coast Ports. Here the increase is a mammoth 40%. However, it emanates from an extremely low base which has hardly affected the Gulf Coast market share by more than about 2%.

The tide is turning for West Coast Ports

At the moment, because it was in the past so dominant, the West Coast Ports in global supply chain terms still command the lion’s-share of the traffic, with approximately 69%. This compares to 73% in early 2013, so the movement is markedly downward. Back in the year 2000, they held an 84% share. Meanwhile, in the same time period, The East Coast Ports’ share of sea freight traffic from Asia has almost doubled to a total of 29%.

The situation for West Coast Ports in financial terms is also worsening. If you look at the dollar value of product imported, it decreased down to 45% this May. According to the latest statistics in the global supply chain arena issued by the US Census Bureau, this May figure is down a massive 51.5% on where it was the same time 12 months ago.

The majority of the gains that the East Coast Ports have made are as a result of the increase in Panama Canal services running between Asia and the US, whereby these services can take advantage of bigger ships and larger container loads. However, the recent figures out of Drewry regarding sea-freight in global supply chains are indicating that this also is now reversing, as the Panama Canal Loops are beginning to increase their share of the market as they ready themselves for the increases in freight that the modified Panama Canal will facilitate.

Newly expanded Panama Canal to increase the shift from West to East Coast Ports

According to the latest global supply chain news, works on the enlarged Panama Canal are somewhere around 90% complete. If they remain on track the extended canal is due to be opened in April 2016. The new, bigger canal will be able to take ships with a 13,000 TEU capacity. To put this into context, the maximum capacity that the current Panama Canal can handle ship-wise is 5,000 TEU.

Although the new canal will not be able to allow passage of the 18 – 20,000 TEU container ships, this is of no real consequence in view of the fact that the US East Coast Ports can’t take these gargantuan ships either.

Since the beginning of 2015 six new service routes have been launched for the Asia/US East Coast Ports with five out of the six being now operated through the Panama Canal. These services include a new offering from the 2M alliance carriers Maersk and MSC, both of whom will be using the Panama Canal now for the very first time as opposed to previously having used the Suez Canal; a significant development in global supply chain demographics.

More new-build ships destined for Asia/East Coast Ports routes

Another significant factor set to influence any global supply chain that traffics via the Canal, is that there are 37 ships with a capacity of 10,000 to 13,000 TEU (the majority of these vessels are smaller capacity) currently on order and scheduled to be delivered to sea freight carriers by the end of 2017. It’s fair to assume that the majority of these new ships will be bound for the Asia/US East Coast Ports routes which will increase the East Coast Ports share of Trans-pacific traffic even more.

Good news for global supply chains – Shipping costs being driven down

One piece of good news for global supply chain shipping buyers is that this increased capacity is likely to drive shipping prices down even further. Prices have already started to reduce, even before the increased capacity is available, on account of the fact that shippers are continuing to take advantage of the glut of capacity that exists on the majority of routes.

What are your thoughts? Do you anticipate the trend towards traffic being rerouted to East Coast for and if so what impact do you believe this will have. Please contact us via the link .and let us know. As always your observations will be appreciated.

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