For the past seven years, there has been a lot of talk about what the widening of the Panama Canal will mean for the ports of New York, New Jersey, and the industries that support international commerce in the surrounding areas such as, trucking services, 3PL services, and real estate. Although the Panama Canal project was completed in June of 2016, we have not seen any of the Panamax vessels dock in our ports. The major hold up now is the raising of the Bayonne Bridge, which is slated to be complete in December of 2017.
Many people in these supportive businesses are not sure what to expect when these larger vessels commence docking in our ports. At the moment, the vessels that are currently calling the ports of NY and NJ max out at 3,800 to 5,100 TEU’s (twenty foot equivalent units). The larger Panamax ships will max out at roughly 8,000 TEU’s. That is almost double the volume of containers per ship. Even if the volume of cargo on containers coming in does not increase, the number of ships calling will certainly decrease. The biggest headache will fall on the trucking and drayage community. The reason being is that right now, certain shipping lanes call the port twice a week on Tuesdays and Fridays, and that will change to once a week when the vessels start arriving. “The truck traffic this will create will be tremendous,” said Del Bobish who is the Senior Vice President of Operations for Port Newark Container Terminal. He continues,”We are looking into creating appointment times for truckers and extending gate hours to prevent horrendous cues waiting to pick up imports”.
There will also be a bigger drive to get this import cargo off the containers and into the supply chain. With increased port hours there will likely be increased warehousing hours. From a real estate perspective this can be either good or bad. On one hand, many warehouse operations will be forced to be more efficient by increasing their throughput in the same amount of space, thus reducing their need to expand into more square footage. However, on the other hand, when you start looking at the overall shipping costs, I think it is fair to say that we will see a significant increase of imports to the east coast.
At the moment, an average shipper importing goods from Shanghai, China is paying approximately $1,800.00 for port-to-port service from Shanghai to Long Beach, California with a transit time of 19 days. Then add the THC (terminal handling charge) of $475.00 plus the rail service to a New Jersey rail yard, which will cost another $1,400.00 and will add 5 days more. So the total cost from Shanghai to New Jersey is $3,675.00 and will take 24 days. Now when you compare that with an all water service from Shanghai directly to the port of NJ, the cost is $2,400.00 and takes 27 days. Sure some importers will be willing to pay the extra money to save a few days, but I think many of the ocean carriers are betting that more will opt to save over $1,000 and take a few extra days.
To reiterate, there has been a lot of talk and a lot of questions, some of which can easily be answered, but for many of these questions it is a matter of time. How the real estate market will be affected by the introduction of larger vessels to the east coast is still a question, but with the already limited inventory in this tight market, I think it is a safe bet that the industrial rent rates will continue to slowly increase over time.
Caption: Maher Terminal’s new larger cranes being set up in anticipation for the Panamax vessels. Current operational cranes in the foreground.
