A Wider Panama Canal Could Lead to a NY Boom, But City May Not Be Ready

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Miraflores Locks, Panama Canal (photo by: flickr user Ryan Healy)

The narrowest piece of Central America could hold the key to millions of dollars worth of additional business for the East Coast shipping industry.  A new channel being built in the Panama Canal will allow wider ships to squeeze through the isthmus in about two years’ time.

The supersize freighters will reduce shipping costs, making it cheaper to move goods originating from Asia to the East Coast, instead of the West Coast, for the first time.  That's expected to bring more ships, more cargo and more jobs to the region.

Ship at NYCT, Staten Island (photo by Kent Nickerson)

Port operators already supported 270-thousand jobs in 2010, and contributed more than $37-billion dollars in business income, according to a study from the New York Shipping Association.

Staten Island Cargo Yard (photo by Kent Nickerson)

 

Bob Silverman, industrial supply chain analyst with Jones Lang LaSalle said the larger freighters will set up a battle for the Midwest market.  Imagine a jagged line that runs north to south through the United States. Silverman calls it the line of demarcation.

“It’s the point at which the costs are equal to receive a container on the West Coast and ship it to that point, versus receiving that container on the East and shipping it,” said Silverman.  And after the Panama Canal has its new locks, that line is expected to shift further west -- favorign the east coast ports.

Eastern ports are giddy with the possiblity of more business.  It could also mean more jobs for truck drivers and other workers who move cargo from one point to another.

The Port Authority of New York and New Jersey is preparing for all the new customers, along with many other eastern seaboard ports.  Dredging projects are underway to deepen harbors to accommodate these larger freighters.  Still, Rick Larrabee, Port Commerce Director for the Port Authority of New York and New Jersey, is cautious.

“There are lots of theories about whether this is a game changer,” said Larrabee.  The cost of gas and rail will also be a factor in which coast has the competitive edge.  “We believe more cargo will come here and the Panama Canal will become more efficient and consumers will benefit,” he said.

But the ships will have to be able to fit into eastern shipping channels, something they can’t do now.

“Right now ports on the East Coast, except for Norfolk, can’t handle those ships because their harbors aren’t deep enough,” said Bib Silverman, the Jones Lang LaSalle analyst.  The dredging projects will help with that.  But the Port of New York and New Jersey has one additional problem:  the big ships won’t fit underneath the Bayonne Bridge, that connects New Jersey to Staten Island.

A project to raise the Bayonne Bridge has been approved by the Port Authority’s Board of Directors.  But it will cost an estimated $1 billion.  And, it won’t be done until 2016, two years after the bigger ships are already sailing through the Panama Canal.  “For those first two years, the Port of New York and New Jersey will not be able to accept the biggest ships, so it will give the Southern ports a bit of a jump,” said Silverman.

Bayonne Bridge (photo by Kent Nickerson)

Port Commerce Director Rick Larrabee admits the Port “is playing a little bit of catch up here.”  It may be because the Port had hoped to save money.  “To be very honest with you, the first thing we thought was, don’t fix the bridge, fix the ships,” said Larrabee.  The cost of modification could have been made up in two or three trips.  But the shipping companies didn’t buy it.  “Most of the lines said you need to fix the bridge…we’re not interested in fixing our ships.  And, eventually, we got that,” Larrabee said.

But Larrabee is not convinced the Port is poised to get all that much new business from the massive freighters anyway.  “The West Coast ports will not sit by and watch, they’ll compete for the business,” he said.  He added that even without the Canal expansion, business is booming in New York area ports.  "We've doubled our cargo capacity since 1992, and we expect to double it again in the next twenty years," said Larrabee.

New York Container Terminal, NYCT, is one of the Port Authority’s 70 tenants along the Port of New York and New Jersey.  It among about half a dozen big ports in the region that stand to gain if more shipping business materializes after the Canal is widened.

Jim Devine is President and CEO of NYCT.  He said the Bayonne Bridge raising is not as critical to his company as to other port companies along the New York harbor.  “We have a terminal that’s outside the bridge, a global terminal, and we’re preparing to handle the larger ships there now, with more cranes and a deeper dock,” said Devine.

Ship Gets Unloaded at NYCT (photo by Kent Nickerson)

But the company’s Director of Marine Operations, Joseph Cordero, sees the Bayonne Bridge issue a little differently.  “It’s got to happen,” said Cordero.  “If it doesn’t happen, it will cut off this port and it will cut off all of New Jersey from handling that kind of commerce.”  Cordero added that the two year gap is a very serious gap and has to be closed one way or the other, even if it means doing away with the Bayonne Bridge.  Otherwise, his longshoremen will lose out.

Crane Operators Unload Ship at NYCT (photo by: Kent Nickerson)

 

Larrabee said the Bayonne Bridge project will move forward. “I’m confident we’ll get this done in a reasonable amount of time, so long as we stay on the current time line,” said Larrabee.