After almost a decade of debate, planning and cost overruns, the widened Panama Canal is scheduled to open June 26. The $7 billion construction project will allow bigger ships with more cargo to pass through the 48-mile shipping channel that connects the Atlantic Ocean to the Pacific Ocean.
The expansion of the 102-year-old canal is projected to double canal traffic with the addition of a third lane and room for larger ships. Ships of 1,400 feet in length, 180 feet in width and 60 feet in depth can now pass through – with capacity up to 14,000 containers compared to 5,000 containers in the past.
Along the East Coast, more than a dozen port cities from Wilmington, Del., to Port Everglades, Fla., expect major increases in shipping – and big boosts to the local economies.
After all, the Panama Canal is responsible for approximately five percent of the world's commercial shipping. Other major Atlantic container ports include: New York/Newark, Philadelphia, Baltimore, Norfolk, Charleston, Savannah, Wilmington, NC, and Miami.
“Every port is trying to get a slice of the pie,” PNC Economist Mekael Teshome said. “Ten percent of traffic that currently goes through the West Coast will be diverted to the East Coast ports. This should translate into millions of dollars for the shipping industry.”
Many of these port cities have been making major investments to prepare for more traffic with bigger ships. The work includes dredging deeper shipping channels, installing larger gantry cranes and expanding container yards.
The state of Florida, for example, expects a major return on improvements made at the Port of Miami, Port of Tampa Bay, Port Canaveral and Jaxport in Jacksonville. In 2012, Gov. Rick Scott signed legislation to prioritize port and transportation projects vital to international trade. By 2014 the state’s budget included nearly $139 million for seaport infrastructure.
“Miami could benefit the most with its international import/export business,” Teshome said.
The expansion of the Panama Canal could provide a ripple effect and stimulate the manufacturing industry in the region, and will also help attract producers at the port because of the cheap cost of shipping.
Most large U.S. ports combined public and private money to pay for improvements. Examples include:
In addition to the job growth anticipated in and around the U.S. ports, the canal expansion also is expected to benefit the U.S. economy, Teshome said.
A recent U.S. Department of Transportation study found a return on investment of $7 for every $1 invested in port infrastructure. Besides new jobs in U.S. port cities, the expanded canal could increase U.S. exports and global trade.
One example is natural gas exports from the United States to Asia. Cheaper shipping could make natural gas more attractive to other countries. Currently, only about 6 percent of the world’s natural gas carriers are able to pass through the canal. After the expansion, about 90 percent are expected to fit and pass through.
The U.S. agricultural industry also could benefit by shipping more crops and food from the Midwest to international markets, with larger ships loading at U.S. ports in the Gulf of Mexico and heading to the Panama Canal.
Teshome, however, cautioned that some benefits are being overexaggerated while total expansion costs are "undercounted."
PNC’s economists provide national, regional and global economic & financial trends.
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