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August 28, 2013

The Shipping Revolution

Each year, billions of dollars worth of goods arrive on our shores by sea… oil, cars, electronics and food.  But how those shipments make their way to our ports is undergoing dramatic change in two significant areas.
The first is the Arctic Ocean, suddenly free of ice many summer months and open to traffic. Oil from Norway can now reach Japan by sailing “over” Russia rather than sailing through the Suez canal, a 40% time / cost savings.  And goods from China, the world’s largest shipper, can arrive in Europe cheaper and faster (by up to two weeks) by sailing the “Arctic Golden Waterway” rather than going through the Panama Canal.    
Northwest Passage Sea Routes

Ironically, the Northwest Passage between Alaska and Greenland is not as accessible as the Russian waters.  Canada claims the waters to be their own while the US says they are international.
Of course, both Arctic routes depend on global warming and are only passable a few months each summer.  And both passages are very dangerous.  Though the seas may be free of ice, salt spray hitting the ships’ superstructure freezes instantly at -20 degrees.  If enough ice builds up, ships can literally capsize from the weight.
Not to be outdone, the Panama Canal is expanding in a $5.25 billion project approved seven years ago.  When completed, the wider and deeper channels and locks will handle vessels triple the size of the already enormous “Panamax” ships of today.
PanaMax Container Ship

What does this mean for the US?  Plenty!
To handle the mega-ships, US ports need to be dredged and widened as well.  Almost $46 billion has already been spent for cranes, higher capacity train lines and deeper channels at ports like Jacksonville, Baltimore and, yes, even New York.
The Port Authority of NY/NJ is about to spend $1 billion to raise the height of the Bayonne Bridge to accommodate the taller mega-ships. 
Bayonne Bridge
But environmental challenges may delay the project ‘til 2016 after the new canal opens.
US railroads are also gearing up.  While it used to be cheaper to ship containers to Long Beach CA and then carry them by rail across the US, the new Panama Canal may see those containers arrive on the east coast and be carried by train west.  American coal may find new markets overseas by being shipped directly to Atlantic ports for on-loading to ships.
But rail service between the Pacific and Atlantic is not limited to the US.  The governments of Mexico, Guatemala and Honduras are looking to build a dry-canal (railroad) between the oceans that may be cheaper to use than paying the tolls extracted for shipping through the canal.
And in Nicaragua, the Sandanista-controlled national assembly has backed a $40 billion plan for a Chinese company to dig a rival to the Panama canal.  But there are many who doubt it can be done or that its length, triple that of Panama, will be economically viable.
All of these efforts add up to one thing:  as the ships get bigger, the world gets smaller.

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