Bigger ships heading for Georgia

Metro Atlanta seen gaining in the long run as expanded Panama Canal opens.

The container ship COSCO Shipping Panama was scheduled to glide through the Panama Canal, and into history, early Sunday morning .

The vessel’s journey heralds the long-awaited expansion of the canal and the promise that ever-larger container ships will revolutionize East Coast shipping much to Georgia’s benefit. State and U.S. taxpayers are betting $706 million — the cost of deepening the Savannah River so larger ships can use it — on the hoped-for benefits of an expanded canal.

More cargo, revenue and jobs will come Georgia’s way, backers say, with metro Atlanta and its welter of warehouses and trucking terminals taking the lion’s share of new business.

Or maybe not.

“No one knows with absolute certainty what it means for Georgia and the East Coast,” said Griff Lynch, incoming executive director of the Georgia Ports Authority, who’s in Panama for the festivities. “But people feel confident that there will be some incremental growth to Savannah, Georgia, Atlanta and other locations in the Southeast.”

“Incremental” wasn’t the word used by enthusiasts in pushing the Savannah port project. They spoke instead of the canal expansion as a “game changer” that would lead to a “dramatic” increase in trade if only the Savannah River could be deepened to service larger container ships.

The realities of global shipping, and the uncertainties of the global economy, have tempered expectations.

“The East Coast has already gained significant market share. A lot of the (trade) gain we expected to happen already did happen,” said David Egan, who heads logistics research in the Americas for real estate services firm CBRE. “It’s now at a point of equilibrium with the West Coast.”

The stakes for Atlanta and its network of distribution centers, trucking companies, rail yards and logistics firms, are huge.

Savannah and the port of Brunswick account for an estimated $40 billion in statewide economic impact, according to the University of Georgia, with most activity in and around metro Atlanta.

Metro Atlanta “is really a port town,” Egan said.

A watery wonder

It was hailed as the eighth wonder of the world when the U.S.-built Panama Canal opened in 1914, a 48-mile long ditch joining the Atlantic and Pacific oceans. No longer would ships need to round treacherous Cape Horn to reach factories and markets in Asia and the Americas. Nearly 8,000 miles of transit time was shaved from ships’ voyages.

The first major expansion of the canal got underway in 2007, a $5.25 billion engineering marvel adding a third lane and new set of locks which would double the number of ships able to traverse the Panamanian isthmus. The project was pegged for completion in 2014, but delays and cost overruns postponed the centennial celebration.

The canal will now be able to handle ships carrying 14,000 containers — three times current capacity.

Most East Coast ports, though, aren‘t ready. Savannah’s project will take until 2018 to complete. Charleston awaits federal approval for its $510 million plan to deepen its harbor to 52 feet.

The port of New York-New Jersey, where 40 percent of East Coast cargo alights, won’t finish raising the Bayonne Bridge to accommodate bigger ships until late next year. Shippers say the biggest vessels won’t come to the East Coast at all without deliveries to the massive New York market.

For now, container ships bigger than the ones currently calling will steam through the Panama Canal to eastern ports, though some won’t be able to bring a full load until port improvements are finished.

The Georgia Ports Authority reports that five shipping lines, including ZIM and Evergreen, will boost the size of their vessels calling on Savannah. NYX, a new service, will send ships from central and northern China capable of carrying 10,000 containers through the canal to Savannah, Norfolk and New York. Vessels calling on Savannah currently average 5,327 containers.

Not filled to the gills

But the U.S. Army Corps of Engineers concluded five years ago that “no additional cargo volume” will flow into Savannah due to a deeper river. Deepening, nonetheless, was approved because shippers and retailers would save millions of dollars moving cargo in and out of Savannah while keeping port competitors at bay.

“These ports that, by necessity, made a lot of investment to handle these big ships won’t really see an increase in volume because there’s only so much volume to go around,” said Larry Gross, a partner with FTR Transportation Intelligence. “It’s just sort of the cover charge to be in the game. But they had no choice because, if they didn’t, the ships wouldn’t come.”

Lynch says Savannah’s inherent benefits — two rail lines into the port; the massive and relatively inexpensive Garden City Terminal; and proximity to the Atlanta mega-market and distribution hub — will continue to be its major appeal. Savannah, the nation’s No. 4 container port by volume, is also the closest, biggest Eastern port to the Panama Canal.

Shipping lines like to carry as little weight as possible to save on fuel. So it behooves them to use the first suitable port.

“Savannah will be the first port of call, then Norfolk, then New York,” Lynch said. “As they head back to the Panama Canal, they can load up on exports at Savannah. We offer a very balanced market and the expansion of the canal only works to our favor.”

Yet even Savannah’s proximity to the canal doesn’t automatically translate into trade.

Five years ago, almost half the containers handled in Savannah came through the Panama Canal, according to the ports authority. Today, only 30 percent do. About half of Savannah’s containers come through the Suez Canal, a shorter route to the new Asian manufacturing hubs in southern China, Vietnam and India.

The Suez aims to maintain East Coast supremacy. It cut tolls by 65 percent for container ships leaving southern U.S. ports for China, Korea, Japan and Vietnam.

Shifting deliveries

Savannah’s past success — the fastest growing U.S. container port over the last 15 years — may also lessen the canal’s impact. Case in point: last year’s West Coast labor strife, which greatly slowed handling of imports, prompted carriers to shift deliveries to the East Coast. A decade ago, Western ports handled 60 percent of container traffic. Today, it’s nearly a 50-50 split.

“That’s a long-term trend that was accelerated by the West Coast disruption last year. The new canal didn’t do that,” said Gross, the logistics expert. The canal’s expansion “is going to be relatively uneventful in terms of what the East Coast can expect at least in the short- to medium-term.”

It’s the long game that matters, argue Lynch and other backers of the Savannah deepening.

Savannah doesn’t just feed the burgeoning Atlanta and Southeastern markets. The Midwest is the big prize.

Until recently, it was cheaper for retailers as far east as the Ohio Valley to import Chinese-made lawn chairs or shoes through West Coast ports and rail them eastward. The new canal could push the so-called “line of indifference” further west.

“If we’re the first port of call … and with the developing rail offerings, we think we can be competitive to Chicago, St. Louis and other Midwestern locations in the next couple of years,” Lynch said.

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