Source: adapted from G. Armold (2009) “Global Supply Chain Trends and the Impact on North American Distribution Markets", Talking Freight Seminar, US Department of Transportation - Federal Highway Administration.

Transit Times from Shanghai and North American Routing Options (in Days)

Containerized transportation in North America has seen several changes in recent years, impacting volume, the usage of gateways and intermodal options to access the hinterland. Initially, the growth of transpacific trade had negative impacts on the market share of East Coast ports since the development of Asian outbound logistic chains and the efficiency of intermodal rail has favored the use of West Coast ports to service the hinterland. However, new trends point towards a change in this equilibrium:

• Routing options. From transpacific trade, there are several routing options to service the East Coast, from the landbridge to all-water routes through the Panama or the Suez Canals. The intermodal option takes about 18 to 20 days to link Shanghai to Chicago, including 13 to 14 days of maritime shipping and 5 days of rail. A few uncertainties have emerged about the capacity and reliability of landbridge corridors, notably congestion and port and rail labor issues. For supply chains, reliability is commonly a factor as important as time and cost. Supply chains can accommodate longer transit times through warehousing and frequency adjustments, but unreliability is more difficult to cope with.
• New routing options. In addition to existing options, two new options to access the North American inland market have come online; Prince Rupert (supported by CN) and Lazaro Cardenas (supported by KCS). From a transit time point of view, the Prince Rupert option appears advantageous, taking about 16 days to reach Chicago along an uncongested rail corridor, entirely controlled by CN. The Lazaro Cardenas option is also appealing by its proximity to the commercial trade of the South American west coast (e.g. Chile, Peru) and as a gateway to the Mexico metropolis and the American heartland through Laredo and Kansas City. KCS has made substantial investments with new intermodal yards at Lazaro Cardenas and in Kansas City.
• Decline in the intermodal share. There has been a significant drop in the share of intermodal rail servicing the East Coast to the advantage of the Panama Canal route. In 1999, intermodal rail accounted for 85.7% of the container traffic between Northeast Asia (China, Japan and Korea) and the East Coast, while the Panama and Suez canal routes respectively accounted for 11.3% and 3% of total container traffic. In 2007, the share of intermodal rail dropped to 55%, while Panama and Suez all-water routes went to 43% and 2% of the total traffic. The main factor behind this change was that transpacific trade growth made direct all-water services more attractive from an economies of scale and frequency of services perspective. There is now enough volume to justify pendulum services between a variety of Pacific Asian and East Coast ports. Additionally, the introduction of post-panamax containerships above 8,000 TEU for transpacific and Asia-Europe (via Suez) services has relegated panamax containerships (4,200 TEU) to more secondary routes.
• Rectification of trade imbalances. The export-oriented strategies (neo-mercantilism) followed by several Asian economies are compromised. On the short and medium terms, transpacific trade is likely to experience much less, if any, growth potential and accordingly limiting the growth prospects of West Coast ports.
• Expansion of the Panama Canal. The expanded capacity of the Panama Canal, expected to come online by 2014, is likely to change the configuration of global freight distribution systems. With a close capacity parity between the Suez and Panama canals, maritime shipping companies may expand circum-equatorial services using high capacity containerships in the 8,000 to 12,000 TEU range. East Coast ports could be called through feeder services from transshipment hubs in the Caribbean. At least, the expansion of the Panama Canal will expand routing options.

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