|Aggregate demand||Potential shift in demand growth patterns (less growth in North America and more growth in Latin America)|
|Maritime shipping costs||Higher shipping costs and slow steaming;
Tolls taking a large share of the benefits of economies of scale
|Economies of scale||Less ship calls and traffic concentration|
|Transshipment hubs||Changes in the transshipment dynamics (hub
"Funnel effect" towards Panama
|West Coast ports||Improved competitiveness of West Coast ports through better hinterland access|
|Railways||Improved competitiveness of North American rail
Emerging dichotomy between East Coast and West Coast railways
|Gateways||New points of entry to service markets (e.g. Lazaro Cardenas, Prince Rupert)|
|Suez Canal||Increasing competitiveness of the Suez Route;
Potential of the Cape Route
|Global sourcing||Changes in sourcing strategies (e.g. near sourcing)|
- Lower aggregate demand. A common misconception is the belief that the expansion of the Panama Canal will generate additional trade. The fast growth opportunities that have prevailed until 2007-2008 are unlikely to continue due to various technical, economic and demographic factors. This underlines that a shift in the drivers of global freight transportation demand may be at play. On the medium term, the global container throughput could be leveling off (at least in mature markets such as Europe and North America), implying less demand for maritime transportation or at least less growth opportunities. This trend is much less salient in Latin America where the potential for substantial growth remains. The rebalancing of this growth will impact the shipping routes using the Panama Canal.
- Maritime shipping costs. Since the choice of routing options dependents on comparative costs, two variables influence the selection of the Panama Canal route option. The first is fuel (bunker) prices and slow steaming. Higher prices incite maritime shipping companies to reconsider routing options, network configuration and the type of ships used. The second cost variable concerns tolls levied on cargo (containers) transiting through the Panama Canal. As the expansion of the Panama Canal came with substantial capital investments, there will be pressures on the Panama Canal Authority to amortize the contracted debt through higher tolls. This creates a conundrum since higher tolls undermine the attractiveness of the Panama Canal as a routing option.
- Economies of scale. Since the expansion of the Panama Canal was designed to accommodate larger ships, expanding economies of scale on routes that were previously limited to 4,200 TEUs (Panamax ships) could lead, at least initially, to less ship calls and the concentration of traffic at specific transshipment hubs. There are also operational limits to economies of scale as larger ships put additional pressures on port and inland infrastructure. For instance, many East Coast ports have undertaken infrastructure expansion and dredging projects with the expectation that the expansion would involve calls by much larger ships. Although the economies of scale benefit that the expansion will convey to maritime shipping, such advantages are not that notable from a supply chain perspective. Larger ships usually involves less frequent services, which can be disruptive for supply chain management with more cargo needing to be handled during port calls. There is also a cargo insurance risk since more cargo is being carried on less ships.
- Transshipment hubs. The expansion will likely change the transshipment dynamics in the region. Bigger ships have a lower tolerance to deviation from main shipping routes, which may incite a greater role for port in Panama and in the vicinity (e.g. Cartagena) to capture additional transshipment traffic (the "funnel effect"). Also, maritime shipping companies may elect to use the trans-isthmus rail and road options to shift containerized cargo between Atlantic and Caribbean Panamanian ports.
- Response from West Coast ports. The Panama Canal route (all-water route) is competing with ports along the American West Coast to access some North American markets, including the East Coast (landbridge versus all-water routes) and the Midwest. It is uncertain to what extent the cargo handled by the West Coast is divertible to other maritime ranges, with some putting this figure in the vicinity of 25% of the intermodal cargo. West Coast ports are implementing various strategies to improve their competitiveness with a revision of their fares, rules and connectivity with their hinterlands. A particular emphasis will be placed on hinterland access regimes as a strategy to improve the cost, quality and reliability of the West Coast as well as to secure traffic outside their fundamental hinterlands.
- Response from North American railways. In light of the previous point, railways, particularly those servicing the West Coast (BNSF and UP), are also implementing strategies to improve their competitiveness for the landbridge market. For instance, in recent years many railways committed substantial capital investments to improve long distance corridors. The outcome will be a more efficient maritime / land interface along the West Coast. There is however a possible dichotomy with railways servicing the East Coast (NS and CSX) as a growth of the all-water route traffic may benefit them with inland services calling from the East and Gulf coast ports. For instance, NS completed in 2010 the double-tracking and double-stacking of a rail corridor between Hampton Roads, Virginia and Columbus, Ohio; labeled the Heartland Corridor.
- New gateways. Gateways are major freight platforms that coordinate freight distribution over vast markets. The development of the Savannah gateway has been a notable driver of traffic growth through the all-water route. Two new port gateways are also emerging, both with the support of major rail operators. In Canada, Prince Rupert capitalizes on shorter transpacific distances and a dedicated and uncongested CN rail corridor to Chicago. In Mexico, Lazaro Cardenas with a rail corridor operated by KCS up to Kansas City (and through the major market of Mexico City), offers a new corridor in tune with the NAFTA trade. Thus, the role of gateways in coordinating freight distribution influence the routes selected to access markets.
- Suez Canal option. The usage of the Suez Canal as a routing option to service East Coast ports has increased in the last decade, particularly with the growth of transshipment activities around the Mediterranean basin as well as shift in sourcing towards South and Southeast Asia. Mediterranean transshipment hubs offer additional opportunities to consolidate Asian and European cargo and employ larger ships. The Cape Route option is also an alternative to connect to Asian markets, particularly for Brazil and Argentina.
- Global sourcing. A substantial share of the growth in global trade over the last decades was based upon the exploitation of global comparative advantages, particularly labor in Asia, through outsourcing and offshoring. This has favored the growth of Transpacific trade as well as the use of the Panama Canal to access the American East Coast. The rise in labor and energy costs is mitigating this process and incite supply chain managers to consider closer sourcing alternatives, such as in Latin America, or even sourcing back to the United States. The outcome would be a more regionalized production system (near sourcing) that relies less on long distance shipping.