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.

Peru’s Economy Grows

The Peruvian economy had surpassed predicated outlooks and posted a 3.87 percent growth in June. The official figure could strengthen business and consumer confidence, which would help solidify Peru’s tenuous recovery.

Peru’s mining-fueled economy has slowed sharply in the past one and a half years as weak mineral prices have curbed investment.

Quick facts:

  • Mining led growth in June with a 14.15 percent expansion as output from new copper mines and others increased
  • Retail and wholesale sales were up 4.1 percent and agriculture increased 8.1 percent.
  • Construction fell 3.15 percent; fishing, 29.6 percent; and manufacturing, 2.89 percent, official data showed

The economy grew by a seasonally adjusted 1.1 percent rate in June from May, when it expanded by just 1.22 percent year-to-year, Inei said.

In 2014, the economy expanded by 2.35 percent, half as fast as in recent years when growth topped five percent. Expectations are that the economy should rebound in the second half of the year on public spending, and should end the year with growth of close to four percent.

According to research from the Florida Chamber Foundation, international business and foreign direct investment account for approximately 17 percent of Florida’s economic activity, and directly support more than one million Florida jobs. With more than 30 million people and one of the strongest economies in South America, there is a strong potential for Florida companies to expand their exports to Peru. Florida currently exports many different types of Florida-origin products to Peru, including industrial and electric machinery, fertilizers, vehicles, civilian aircraft, and medical instruments.

In fact earlier this year, the Florida Chamber of Commerce and the Lima Chamber of Commerce signed a Memorandum of Understanding (MOU) to help promote trade and investment opportunities between Peru and the United States.

 

Learn More:

In order to remain globally competitive, Florida needs to diversity our trading partners and markets to expand and grow Florida trade.  This is a strategy identified in the Florida Chamber Foundation’s most recent Trade and Logistics study. To learn more about how the Florida Chamber is work to build Florida’s international relationships, contact Alice Ancona today at aancona@flchamber.com.

 

Get Involved:

Two out of three jobs in Florida are created by small businesses. As such, the Florida Chamber continues to work in support of Enterprise Florida’s small business export grants, which help Florida exporters tap into new markets. Get involved in our efforts this upcoming legislative session by contacting Carolyn Johnson at cjohnson@flchamber.com today.

Florida Chamber Outlines Economic Strategies

By KRISTIE CLOUD / FLORIDAN

At a Monday morning seminar in Marianna, the Florida Chamber Foundation talked about strategies that the organization believes are necessary to make this region of the state a hot spot for manufacturing and other job-creating businesses that could “stop the bleeding” as North Florida watches its young people take their talents elsewhere in search of lucrative jobs. They’re trying to make the region a formidable contender on a global economic scale.

The group is taking its message across this sector of the state in a number of seminars like the one held in Marianna. Highlighting some of the observations put forth in “Florida: Made for Trade,” the organization’s Northwest Florida Trade and Logistics Plan, Foundation Executive Vice President Tony Carajal moderated the event.

The goal, Carajal said, is to get North Florida ready to be a key player in the global marketplace, right along with California, Texas, New York, South Florida and other places that more often draw the attention of the auto industry and other job-rich businesses.

One of the necessary strategies in making that happen, he said, is for economic leaders and the general population to start thinking regionally rather than more selfishly about the specific community they occupy when they think about trying to spur growth. Working together rather than against each other could give the area a better shot at landing a business that could translate into jobs for many communities, not just the one place that a big industry might land.

North Florida counties should also build such relationships across state lines, he said, with those in lower Alabama, for instance.

One speaker, Neil Wade of the Bay Economic Development Alliance, provided an example of how that might pay off one day for Jackson and surrounding areas. A big announcement will be formally made on Oct. 3 that Florida officials and their counterparts in Alabama have worked together to all support marketing a property in Campbellton as a “super site” candidate to large businesses looking for a place to set up shop. The announcement will be made in a ceremony at the Florida Welcome Center on U.S. 231 with Jackson County officials and some from Alabama and other Florida counties in attendance.

The auto industry might be one of business-types courted. With officials from both sides of the state line supporting the site, they won’t be competing as a potential site. However, they’ll be free to rigorously compete for businesses that might spring up as a result of the industry moving into town.

A new work has been coined for the concept: Those who espouse it call the strategy a spirit of “co-opertition,” or cooperative competition.

Trying to get industries here is just part of the battle; the region must immediately start building its own new-age manufacturing workforce at the elementary, high-school and college level if the communities hope to catch and hold the serious interest of the companies they want to see moving in. That means tailoring some curriculum tracks to the disciplines that give students a head start on landing such jobs, and give businesses confidence that there’s a workforce waiting in the wings if they were to set up shop.

Trade, logistics and export-oriented manufacturing concerns are some of the target-types the Foundation is after.

The organization wants to develop a Florida Trade and Logistics Institute to continue the state’s quest to move into a stronger position in the global economy. Such a group might help keep track of infrastructure needs as they develop, work out strategies in specific industry-seeing situations, and help keep an overall eye on the many facets that play into the state’s economic goals.