The New Suez Canal

With 90 percent of the world’s trade moving by sea, the expanded Suez Canal will be a game changer.

 

Quick Facts:

  • $8 billion, 44.7 mile extension to the Suez Canal will for the first time allow two-way traffic on the canal
  • The new channel allows for a reduction in transit times from 18 to 11 hours
  • Provides increased capacity for vessels with drafts over 45 feet (prior to the opening of the new channel, only eight vessels with drafts greater than 45 feet could be accommodated on the canal at any one time)
  • The extension to the canal has seen 72 kilometers (44.7 miles) of new canal created, parallel to the current channel. The projected included 35 kilometers (21.7 miles)of dry digging and 37 kilometers (23 miles) of deepening
  • The average size of ships on the Far East-U.S. East Coast route via the Suez Canal has increased by 73 percent since 2005 to 7,800 twenty-foot-equivalent units, while vessels on the same trade via the Panama Canal have grown by only 12 percent in capacity to 4,600 TEUs due to size restrictions.

 

What Does This Mean for the East Coast and Florida?

The Suez Canal has benefited from delays to the Panama Canal expansion as a number of carriers with larger ships in excess of 8,000 TEU ships, have taken advantage of the larger capacities the Suez Canal and have switched to this route. For a brief period during the U.S. West Coast ports disruption, the ratio of Asia-U.S. East Coast through the Suez surpassed those via the Panama Canal.  That ratio is now slightly back in Panama’s favor as carriers are preparing for the opening of an expanded Panama Canal.

The Asia-U.S. East Coast route is undergoing a period of dramatic changes based on strong eastbound demand, Beneficial Cargo Owners (BCOs) lack of confidence in West Coast ports, a changed shipping alliance structure and new services have helped boost the Suez route.  Drewry, a specialist research and advisory organization for the maritime sector, estimates that extent of cargo shift from the west to east coasts was at 375,000 TEUs between January and June and shows no sign of reducing. U.S. east coast ports have proven to be able to absorb this additional volume with minor disruptions.

The expanded Suez Canal and look forward to continuing to increase its service to the U.S. East coast market, but the degree to which it will increase service will depend on macro events such as how competitive it will remain against an open and expanded Panama Canal in April, Chinese export growth and South East Asian export growth to name a few.

 

A Tale of Two Canals

The opening of these two expanded Canals within a year of each other will deepen the rivalry between the two, particularly for services connecting Asia with the U.S. East Coast, which is now intensified in light of West Coast – East Coast cargo shift.  This is the route where the two canals are in in direct competition with each other.

The new expanded Panama locks, which are due to open in April 2016, will further the rivalry as trade may shift back in favor of an expanded Panama Canal.  The Panama Canal’s decision to temporarily reduce its draft from September 8 due to the draught caused by El Nino is not expected to have any significant impact on Far East-U.S. East Coast services, as it will affect less than 20 percent of the transits.

The average size of ships on the Far East-U.S. East Coast route via the Suez Canal has increased by 73 percent since 2005 to 7,800 twenty-foot-equivalent units, while vessels on the same trade via the Panama Canal have only increased by 12 percent in capacity to 4,600 TEUs due to size restrictions.

The opening of the new Panama locks will allow carriers to transit larger ships through the Panama Canal which will position it to recapture some market share lost the Suez Canal since 2008.

The Panama Canal’s share of the Far East-U.S. East Coast trade has decreased from approximately 90 percent before 2008 to a low of 48 percent in 2014 before recovering to 51 percent currently as a result of the recent launch of five new shipping services.

The Panama Canal’s share is expected to increase to over 70 percent by the end of 2016 as most of the Suez market share from China will likely return to the shorter Panama Canal route.  Trade from South East Asia is expected to preserve the Suez Canal route as that is the shorter route to the U.S. East Coast.

 

What Does This Mean for Florida?

The West Coast-East Coast cargo shift occurred earlier than anticipated due to the west coast port disruptions and delays in the opening of an expanded Panama Canal. The Suez Canal has grown in importance to the U.S. East Coast as manufacturing shifts from China to South East Asia have boosted trade to the U.S. via this shorter route.  Florida ports have captured some of this shift but opportunities remain to capture more.  An expanded Panama Canal will rebalance Asian trade bound for the East Coast in its favor.  Florida will have the first U.S. port of entry at 50 ft depth to receive the larger ships by the time the Panama Canal opens.  Our ability to capture this trade and demonstrate the strength of our connectivity due to our intermodal investments to increase capacity and connectivity to the larger U.S. market will be crucial to this effort.

Florida ports have experienced cargo growth since the West Coast Ports shut down, as shown in the below news articles:

The above are just a few recent headlines. In order for Florida to continue to remain competitive, continued investment in ports, transportation and logistical infrastructure is key for Florida to remain competitive.

 

THERE ARE SEVERAL WAYS TO GET INVOLVED:

  1. Join our legislative “Fly-In” in Washington, D.C. on September 9-10 and lend your voice to our advocacy efforts at the Federal level for these strategic investments in Florida’s future.
  2.  Register today and share your voice with Florida’s transportation infrastructure leaders at the Florida Chamber’s Transportation Summit in December.
  3. Download and share the Florida Chamber Foundation’s most recent Trade and Logistics study.

We are Proud to Call Florida Home

“Choosing Florida means choosing opportunity and economic growth.”

– QUINTIN KENDALL
Vice President of State Government and Community Affairs, CSX Transportation
Florida Chamber Regional Board Chair

Quintin Kendall, Vice President of State Government and Community Affairs at CSX Transportation, Florida Chamber Board member and one of twelve Florida Chamber Regional Board Chairs, shares his opinions on why business should choose Florida, what his time as a Florida Regional Board Chair means to him and on CSX’s crucial relationship to Florida ports.

 

We are proud to call Jacksonville, Florida home. Florida is a great state to do business and at CSX we have found that it is a state that welcomes innovation. Florida’s trade and logistics efforts are leading the country and that’s part of the reason we invested nearly $250 million in our Florida network last year. Research from the Florida Chamber Foundation’s most recent Trade and Logistics study shows that Florida is growing at a rapid pace and industries like manufacturing and trade are growing with it. Choosing Florida means choosing opportunity and economic growth.

 

On Florida  Ports:

In Florida alone we operate more than 28,000 miles of tracks and we serve 12 ports across the state, including JAXPORT here regionally… When ports have a reliable mode of transportation to receive and deliver goods, especially an environmentally friendly mode such as freight rails, customers are able to get good and products in a time efficient manner. I would also add that our investment in the new CSX intermodal center at Winter Haven has a potential to really add tremendous value to an already thriving port system here in Florida.

 

On Jacksonville’s Diverse Businesses:

Investments in infrastructure is what comes to mind immediate. At CSX we help connect the state and connect the state to the rest of the country and it’s that partnership that helps out state be successful, especially with international trade and distribution and manufacturing. The Jacksonville region is very diverse, we have many companies that benefit from transportation and infrastructure, from small businesses to larger companies like ours. In order to meet the needs of these companies, a big focus will be education and developing the talent for tomorrow’s workforce. The education needs in the regional vary widely so I hope to have some good discussions on how we can help empower our students. But also in Northeast Florida, military, veteran and defense are also large industries here in this region. At CSX we are [named a] national leader in employing veterans so I hope to build on that in my role at the Florida Chamber to champion the creation of valuable jobs and help Florida’s economy grow.

 

I’ve seen firsthand the impact that businesses who work together can have on the future of our state. I look forward to helping implement the research found by the Florida Chamber Foundation going forward so that we can help to close some of the gaps and secure our state’s future.

 

On Free Enterprise:

Free enterprise means having the ability to align the needs of our stakeholders and employees, with the needs of our state. At CSX it means having the freedom to follow our core values and build a company that not only drives our economic growth, but that allows us to help make communities and people who thrive there more competitive.