The New Suez Canal
With 90 percent of the world’s trade moving by sea, the expanded Suez Canal will be a game changer.
- $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:
- Containerized cargo shipments through PortMiami increased 12 percent during the first six months of fiscal 2015.
- Port Everglades’ containerized cargo up 8 percent during half-year
- Diversion from the West Coast Ports drove some of the 20 percent year-over-year gain in Asian traffic that Jaxport saw last year
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:
- 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.
- Register today and share your voice with Florida’s transportation infrastructure leaders at the Florida Chamber’s Transportation Summit in December.
- Download and share the Florida Chamber Foundation’s most recent Trade and Logistics study.
Here’s a Simple Breakdown of the Iran Deal
Iran and six world powers lead by the U.S., recently concluded a historic deal aimed at ensuring Iran does not develop nuclear weapons in exchange for the easing of economic sanctions.
Here’s what this deal entails:
- Iran will be able to keep its nuclear program for purely peaceful purposes — including electricity and medical treatments.
- Iran agrees to restrict all uranium enrichment and related research and development for the first eight years of the deal.
- Iran reaffirms that it will leak, develop or acquire any nuclear weapon.
- Iran will commit to reducing its existing stockpile of low-enriched uranium by around 98 percent to under 300 kg (about 660 lbs) for 15 years.
In addition, under the deal, all U.N. Security Council sanctions will be lifted, as will other sanctions placed on the country. Iran will gain access to approximately $100 billion in frozen assets.
What’s next for the deal:
- Congress has 60 days to review the agreement. It is expected to encounter strong opposition from Republicans.
- It also needs to be ratified by Iran’s supreme leader, as well as by the U.N. Security Council.
Here are more resources to learn more about this deal: