Saturday, 28 June 2014

A Canal Story

There's a big moment coming up in about two the newly enhanced Panama Canal (bigger locks) becomes a reality.  You see....for decades...the older locks set into motion a particular limit to the size of vessels going from the Atlantic to the Pacific (or vice-versa).

In the business world, this meant that as much as China could sell into the US....they had to ship it, and that meant stopping at one of a half-dozen major ports on the west coast of the US.  Naturally, the bigger vessels meant lesser cost on shipping, but then the cost of unloading at the Pacific ports came into play, and then you had to figure the costs of trucking your product from that port to a warehouse....typically in the mid-section of the US. some point in 2016, the new larger locks open.....and the bigger vessels can slip by the west coast, and the significant trucking/rail costs involved in getting their items to a central warehouse depot around Texas or near the Mississippi River.

Naturally, this 2016 date worries some west coast port guys....on a hefty salary.....and sets into motion some dramatic change in prices.

But.....there's one other little thing in this mix coming.  No one yet from Panama has said what the cost of the new transit fee will be.  Larger locks....more business....higher fees?  No one knows.  It's highly speculative to sit and guess.

And if that wasn't enough for the west coast folks to worry about.....there's still talk of another canal being built in Nicaragua.  This possible canal....still in planning stages.....would be a joint venture between Nicaragua and a Hong Kong-based company.  Naturally....if the Hong Kong company owned ships, and they mandated a very low passing fee....then Chinese vessels would quickly transit and unload in a lower rate of cost.

You can sense that a number of players are in the pool for this change of logistical effort.  Imagine a major port activity in Seattle suddenly going into a spiral and only unloading thirty-percent of the normal yearly requirements.  Imagine the port in Portland doing the same thing.  And imagine the various California ports suddenly laying off half their union guys.....making $30-an-hour.

By the end of might want to sit back and watch some sudden changes, and note the changes on American society.