Panama Canal expansion fueling US investments

panamacanalBIZMOLOGY — A $5.25 billion development project that will double the capacity of the Panama Canal appears to be on track for completion by 2015. The expansion is crucial for Panama — the waterway’s inability to handle “mega-ships” has led carriers to shift business to the Suez Canal — but its far-reaching impact on US trade and industries is harder to comprehend.

Once the canal is expanded, East Coast ports will become a viable option for massive container ships coming from Asia that have largely been limited to West Coast facilities. While West Coast ports stand to lose cargo volume originating from Asia, the canal expansion also has the potential to open up trade between the West Coast of the US and the East Coast of South America.

Rerouting trade networks will obviously impact deep sea and coastal freight carriers, but the list doesn’t end there. To prepare for shifting trade patterns, eastern US freight railroads are investing in infrastructure, including on-dock rail facilities to connect ports to major rail lines. Companies involved in freight forwarding and warehousing have expanded operations, and businesses and government groups from Columbus, Ohio, to Dallas are preparing for an increase in cross-country rail and trucking traffic. 

And the impact isn’t limited to companies that provide freight transportation and logistics services. Commercial real estate developers and brokers have built and sold new distribution centers. Preparation for larger ship traffic has also prompted numerous port expansion programs, including dredging projects in Miami and Houston, not to mention bridge raisings. The expansion of the Panama Canal will also allow for tankers carrying liquefied natural gas (LNG), supporting an emerging export opportunity for US energy companies.

Infrastructure upgrades that allow for larger vessels also benefit the shipbuilding industry, which is likely tracking events in Nicaragua. According to recent reports, the government there has contracted with a Chinese company to build an alternate link between the Pacific Ocean and Caribbean Sea. Plenty stands between the current plan and a completed canal — $40 billion and 11 years, at the very least — but the proposed waterway would handle even larger ships than the renovated Panama Canal will allow.

To learn more about the trends that are creating challenges and opportunities for businesses across all sectors, check out the industry reports at First Research.

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Photo by U.S. Navy, used under a Creative Commons license.

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