We all know now that the Panama Canal is suffering from a lack of water, due to a prolonged drought. The result is limits on draft of ships traversing it. The Canal has also raised rates recently. So shippers are looking for alternatives.
Just remember that the canal was getting increased use as shippers migrated from US West Coast ports, and started using East Coast ports. The trip is a lot longer in time, but if there is a disruption danger at West Coast ports, it makes some sense. Over the COVID period, East Coast ports such as Savannah and the Port of Virginia have made major investments in inland infrastructure to support better distribution of goods inland. Of course Houston is also a very good port to reach from the Panama Canal and has significant container capacity.
Now we see some results from the merger of the Kansas City Southern railroad, formerly a US Class I line, and the Canadian Pacific (CP) railroad. The new line has significant capacity in Mexico which the KC developed on its own for some years. This new route will allow shippers to send cargo to Lazaro Cardenas in Mexico, a West Coast Mexico port, to Houston or north to Chicago. The route from Asia is longer in time than the US West Coast ports, but days shorter than the East Coast ports, and with excellent penetration to the Central US areas around Chicago and Kansas City.
I think this is a good marketing strategy for the CPKC railroad. Another West Coast port could well get a steady stream of container cargoes. The route would be less sensitive to West Coast US disturbances such as strikes, and less dependence on the BNSF and UP rail systems, both of which are under fire for scheduling issues, and are known to be a bit light on staff, according to recent reports from their various craft unions.
However, when there are no disturbances, the West Coast ports of Los Angeles and Long Beach are still the fast and dependable way to get cargoes into the central US. They are also good fast ways via the land bridge to get cargoes to Europe by transshipping again from the East Coast ports such as New York.
If the West Coast ports can keep on an even keel, I think their efficiency will attract back a good chunk of the trade they lost due to the strike. Trade of all kinds is down, but it’s still considerable.
Marcus Hand | Aug 09, 2023
CPKC offering Panama Canal rail alternative via Lazaro Cardenas into the US
Supply Chain and Logistics 