Leading economic indicators are pointing towards continued economic growth and rising freight volumes. While that upbeat message delivered by Scotiabank senior economist Carlos Gomes at our recent Surface Transportation Summit is welcome news after several years of anemic and volatile economic recovery, it does pose a challenge for Canada’s supply chain professionals, particularly the many dealing with container-based shipments.
Before the 2008 financial crisis, rapid trade growth sparked mainly by China’s world trade ascendancy led to a doubling of the container volume moving through the North American transportation system. Without a similar increase in capacity, it didn’t take long for bottlenecks to develop in the areas surrounding and connecting major port gateways. When labour strife was added to the mix, it made for very fragile supply chain strategies.
Marine ports and intermodal yards have since taken measures and added capacity to address the bottlenecks that plagued them during the previous economic expansion. The current growth spurt is not expected to be as robust as the previous one, in part because China is no longer growing at a double digit pace. But a China growing at a steady 7% GDP and an increasing reliance on containerization as a way to reduce costs for international cargo will no doubt place pressures on the North American transportation system soon enough. I don’t buy into claims that enough has been done to address the bottleneck issues of the past. The reality is the slow recovery hasn’t really tested the system.
In that respect the best advice for supply chain managers not wanting to get caught with all their eggs in one basket when moving international freight is to understand all the options. And there are new options involving the movement for international freight from Asia.
One of the more interesting developments is the New Suez Canal, which is the name given to the first major expansion of the Suez Canal in Egypt, which started this summer. The first stage of the project, which is expected to be completed within a year, will dredge and deepen a 72-km long New Canal and create seven new tunnels under the Canal, connecting the Sinai Peninsula to the Egyptian homeland. A second stage for the project will create the Suez Canal Supply Chain & Logistics Corridor within 5 years.
If you’re moving freight from Asia why should this interest you? Because, as Hazem Ghonima, president of TAF Consultants, explains, it will double the capacity of the Canal from 49 vessels to 97 vessels per day and cut down the voyage time through the Canal from the present 20 hours to 11 hours. The New Canal will enable ships with a draft of 66 feet, carrying more than 18,000 TEU, and VLCC oil tankers of 250,000 DWT to transit freely in two directions at the same time. This will no doubt make containerlines consider the efficiencies of reaching Eastern North America through the Red Sea, Mediterranean and Atlantic rather than the current Pacific Ocean/Panama Canal and West Coast/Continental Intermodal Network options.
Of course, the Panama Canal is also moving aggressively to continue to attract containerlines. Its planned expansion, which includes two new sets of locks and widening and deepening existing navigational channels, will allow the handling of vessels capable of carrying up to 12,600 TEUs.
But if the Suez Canal’s ability to handle the largest containerships appeals to marine lines looking to generate increased revenue from greater productivity, we could be seeing an increasing amount of Asian trade reaching our shores this way. At the very least it will provide a viable alternative to the bottlenecks presented at the US West Coast ports during the previous economic expansion. Maybe it will even make saner heads prevail during labour negotiations.
Either way, the Port of Halifax, which has plenty of available capacity and enjoys the deepest berths on the North American East Coast and is capable of handling the largest container vessels plying our oceans, stands to gain. So do supply chain managers who have one more option.
With more than 15 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics. All posts by Lou Smyrlis