Panama Canal expansion will have major economic impact on US and World

The widening of the Panama Canal is due to be complete in early 2015.  This project costing over 5 Billion dollars will result in doubling the daily capacity of the one of the world’s biggest transport bottle necks.   The amount of press coverage of this endeavor is fairly minor and rarely mentioned in any economic projection report.   Yet the implications for this project will have significant impact to a large number of industries.

If you are in the business of freight, importing and exporting, real estate, construction, energy, manufacturing, agriculture and even distribution, then you could be impacted in some way by this project.

Currently 80% of products being imported from Asia comes to the US by one of the West Coast Ports and transported via truck, rail or plane to other parts of the US.   The widening of the canal will cause some of that traffic to route through the canal and porting in cities such as Galveston, Charleston, Norfolk and even other eastern cities further up the coast.   This reduces shipping costs and changes the overall shipping logistics picture in the US.

There will be more competition between ports as ocean shippers will have more choices.  This will put pressure on ports to reduce costs, spurring productivity increases and investments in automation.

Many of the Eastern Gulf and East Coast ports can’t currently handle the larger ships that will be able to pass through the Panama Canal.  This is spurring a number of construction projects and investments to make ports passes wider and deeper.

The Midwest will have lower cost avenues to ship grain to Asia as Galveston will become a more convenient port for handling grain.  The larger vessels could result in a .35 per bushel savings in transport cost.   The lower cost should open up more foreign markets and increase US grain exports.

Railroads and trucking will have to adapt to the new competition and invest to lower costs and improve reliability.

Cities along the Eastern Gulf and South East will see more trade activity.   Added distribution and manufacturing centers will result in an economic boon for these cities.   Commercial, municipal and residential construction should see significant up swings.

Logistic companies should see more business as the added choices and shipping routes may require more knowledgeable specialists.  Companies that typically handle their own logistics may opt to off- load that work.

All businesses that import or export products should benefit with lower shipping costs.

Obviously not everyone will win, there will probably be big winners and big losers as companies scramble to adapt to new realities.  The West Coast ports along with some localized freight companies on the west coast could lose millions of dollars of revenue.  Local economies along the Western Coast could take a hit.   Anyone in the shipping or transport industry that is not paying attention to the implications of the Panama Canal expansion could find themselves in  a difficult situation if not planning for the changes in routing and distribution.