The Potential Impacts of the Panama Canal Expansion on Texas Ports, Final Report

2018PDFTech ReportPRC 17-78PortsSeaportsInteroceanic canalsCanalsOcean shippingShippingPanama CanalPanama Canal expansionPanamaTexasUnited StatesTexas A&M Transportation InstituteProzzi, JolandaOvermyer, SarahTexas A&M Transportation InstituteTexas A & M University. Transportation Policy Research CenterUS Transportation CollectionThe Panama Canal is a set of locks that allows vessels to pass through the Isthmus of Panama. When the Panama Canal opened in 1914, it provided the first ever direct water passage between the Atlantic and Pacific Oceans. The new all-water global shipping route allowed for shorter maritime travel distances between several key markets and significantly cut costs for shippers (1). Since its opening, over 1 million ships have passed through the canal (2). In 2016, the Panama Canal opened a second, larger set of locks to accommodate larger vessels. Larger vessels offer the potential for lower costs to shippers by lowering the perTEU 1, per-barrel, or per-ton costs. Of interest to Texas, the expansion of the Panama Canal means that larger vessels traveling from East Asia can now access the U.S. Gulf and East Coast on an all-water route, which is often the cheapest way to transport goods. This report focuses largely on Asia- U.S. trade because 51 percent (in weight) of all traffic passing through the Panama Canal is goods traveling between the U.S. and Asia (3). Prior to the expansion, any vessel too large to fit through the Panama Canal would have to use an alternative route between East Asia and the U.S. East and Gulf Coasts. Alternative routes include the U.S. intermodal route (vessels dock at West Coast ports, then ship goods over land via truck or rail), and the Suez Canal (traveling in the other direction around the world). The canal itself has predicted a doubling in cargo capacity due to the expansion. At the other extreme, some reports predict that the canal expansion will have no effect on current shipping routes. For example, in a study released prior the opening of the new Panama Canal locks, it was predicted that the expansion would not impact routes from Asia to the East or West Coast because different commodity types have different shipping strategies, regardless of the size of the Panama Canal locks. High-value, time-sensitive goods tend to use West Coast ports to take advantage of time savings; low-value, low-cost goods tend to prefer East Coast ports because the all-water route is more cost effective (4). 2 To attract larger ships, some ports in the U.S. Gulf and East Coast have invested in infrastructure to accommodate Neopanamax vessels