The Panama Canal may be 3,252 miles from Reno, but a $5.25 billion project to widen the century-old shortcut between the Pacific and Atlantic oceans is being watched carefully by logistics industry executives in northern Nevada.
The project scheduled for completion in early 2016 widens and deepens the canal so that it can handle more of the super-sized container ships that keep world trade afloat.
Kasia Wenker, logistics sales director at Sparks-based ITS Logistics, explains the potential impact on northern Nevada of the canal-expansion project:
As U.S. imports from China and other Asian nations have grown dramatically, so have the container ships that carry that trade.
But container ships longer than 965 feet don’t fit through the existing locks at the Panama Canal, which effectively requires that they unload their cargos at ports at Oakland, Long Beach and other West Coast locations.
From there, merchandise travels by rail and truck to consumers across the United States — including the distribution centers of northern Nevada.
But if large container ships can cross through the Panama Canal and call directly at East Coast and Gulf ports, will the shift in trade routes affect the Reno-Sparks area?
Mike Kazmierski, president and chief executive officer of the Economic Development Authority of Western Nevada, says his agency expects little impact — either positive or negative — from the Panama Canal expansion.
“Most of our distribution here is for customers in the West,” Kazmierski says. “The way it arrives here could change but the distribution from here to the 11 Western states would not change.”
Executives at the Port of Oakland, too, expect little lost business when the canal expansion is completed.
Robert Bernardo, communications manager for the port, says some shippers undoubtedly will choose East Coast and Gulf ports for shipments of merchandise from Asian manufacturers.
But he notes that the Port of Oakland — which feeds international trade in northern Nevada — is close to major West Coast markets and is particularly well served by both the Union Pacific and BNSF rail networks.
The port, which a 2012 study found to be fifth busiest by volume in the United States, is heavily involved in the time-sensitive export of agricultural produce from California’s Central Valley as well as exports of minerals from Nevada’s mines.
For big importers — the giant retail chains who keep a steady stream of container ships on the seas between China and the United States — the expanded Panama Canal may not be a cost-effective answer, says ITS Logistic’s Wenker.
Say that ocean delivery of containers to the Port of Savannah takes a couple more days than delivery to the Port of Oakland and a train trip across the nation.
Financing inventory for an additional day or two of shipping time can become prohibitive, Wenkler says.
“If more product is on the water, they need to have more product,” she says.
Devine Intermodal, a West Sacramento company that’s busy hauling containers back and forth over the Sierra between Reno-area distribution centers and the Port of Oakland, is less sanguine about the potential for world trade to flow in new directions.
But the Panama Canal expansion is only one factor in a historic shift, says Karen Vellutini, vice president of sales and marketing for Devine Intermodal.
The shift began with a labor lockout at West Coast ports in 2002 that left traffic so snarled and congested that shippers still were sorting things out six months later.
“Prior to the lockout, major retailers were, for all intents and purposes, using only the West Coast as their gateway,”
Vellutini says. “With cargo tied up for weeks during the import peak season, the realization began to set in they needed more diversity in their supply chains.”
East Coast and Gulf ports launched major expansion projects, new distribution centers were developed near port cities, and more importers figured out that multiple gateways on different coasts provided insurance against weather problems or labor disputes.
As East Coast ports developed, some larger ships began traveling through the Suez Canal to serve them directly.
Given those longstanding trends, Vellutini says expansion of the Panama Canal is unlikely to result in significant additional shifts in cargo away from the West Coast.
But she says the West Coast ports — and the distribution hubs such as Reno that depend on them — still face significant challenges.
“West Coast ports are their own worst enemies,” she says. “They must improve productivity, ensure reliability and come through the upcoming (labor) contract negotiations unscathed.”
