4 minute read
US East Coast Drift
EAST COAST DRIFT
The US East Coast is building market share in the container sector. AJ Keyes identifi es the drivers of this trend and considers the potential for long-term cargo capture
Container ports on the US East Coast have been benefi tting from larger ships calling via the enlarged Panama Canal and a desire to use the All-Water routing in recent years, although the expansion of the waterway has seen larger ships than originally envisaged. The improved Panama alternative was already seeing increased market share before recent congestion emerged. With labour contract uncertainty on the West Coast mounting, the US East Coast seems set to benefi t further.
In 2016 when the Panama Canal expansion was finally completed, it represented a true step-change for the US port industry on the eastern seaboard. Since the announcement of the expansion of the waterway some years previously, almost all ports invested to be “big-ship” ready through a combination of dredging and improved infrastructure.
There was a definite need to be in the race to attract larger ships. In simplistic terms, the enlarged Panama Canal effectively raised sizes of ships able to transit from around 5000 TEU up to around 14,000TEU. In early 2022, redesign of these larger vessels has increased effective capacity to almost 16,000 TEU, following ongoing work by the waterway authority.
Since mid-2021, the maximum length overall for commercial and non-commercial vessels acceptable for regular transits of the locks has increased by just over three metres (370.3m versus 367.3m). As a result, almost 97 per cent of the world’s fleet of containerships can transit the waterway, the Panama Canal states.
In addition, the Panama Canal also increased the maximum draught permitted to the highest level allowed in the access route, by adding an additional foot of depth. It means the maximum vessel draught improved to 50ft compared to the previous maintained level of 49ft (subject to rainfall levels and water management by the authority).
BIGGER TRAFFIC TOTALS
So, how have the major container ports on the US East Coast benefitted? Well, there is no doubt that port volumes have increased for the five largest container ports (excluding Florida), with a noticeable rise commencing after 2016 when the enlarged Panama Canal was seeing fully revised services with larger tonnage.
For example, New York/New Jersey (NYNJ) handled 6.25 million TEU in 2016, which hit 7.18 million TEU by the end of 2018. Likewise, Savannah’s 2016 throughput of 3.65 million TEU increased to more than 4.35 million TEU over the same three-year period and Charleston recorded a rise from over 1.99 million TEU to 2.32 million during these years. Virginia also saw an increase, from 2.66 million TEU to 2.94 million TEU. So market share was increasing but the COVID-19 congestion added another layer of demand. The key question is will this endure?
So, what does the future hold for USEC ports? Well, the continued increase in ship sizes able to access the Panama Canal has been a help in allowing larger vessels to use the All-Water trade routing, but there are other factors.
During 2021, congestion at USWC ports, most notably the San Pedro complex, helped to divert cargo to the eastern seaboard. This is a continuing trend, as Figure 1 shows.
Since 2000, there has been, in overall terms, a shift from West Coast to East Coast, with the gap between the two port ranges diminishing. For 2021, the West Coast ports contributed an estimated 48.2 per cent, with eastern ports an estimated 44.4 per cent (with the difference attributable to the role of US Gulf ports in the total).
However, in 2015 when the Panama Canal expansion was being finalised, the totals were 50.1 per cent (West Coast) and 43.6 per cent (East Coast). So it has had some impact, but on further analysis, there are other key years where a change has occurred.
In the years following 2002, 2006, 2010, 2014 and 2018 there was a gain in estimated container port share retained by the eastern seaboard facilities, also partly supported by the continued drift of manufacturing away from China to South-East Asia and India.
The relevance of the different years listed is that each one highlights when the International Longshore & Warehouse Union (workforce) and Pacific Maritime Association (employers) contract negotiations were ongoing or due to be finalised at USWC ports. As a result, beneficial cargo owners and shipping lines looked to identify alternate gateway options for key North American hinterlands, most notably the US Midwest.
So while the increase in ship sizes able to access the Panama Canal has helped to support demand growth potential for USEC ports, there are other factors playing an equally, if not more important role in driving liner strategies and container port demand – most notably the employerworkforce contract processes. With the current round of discussions about to commence, East Coast ports will feel confident that the gains achieved in 2021 can be retained and even built on in 2022.
8 Figure 1: Share
of Total Container Traffi c by Coast in North America, 2000-2021
8 Savannah is a
