The decision to expand the Panama Canal happened only after dozens of agencies performed over one hundred studies over a six year period related to economic feasibility, market demand, environmental impact and other engineering aspects. The project is estimated to cost $5.25 billion and will be completed by April 2016. The Panama Canal Expansion program includes four main components including the addition of a third set of locks, the addition of the Pacific access channel, improvement of navigational channels and improvement in water supply. As of September 30th, 2015 the entire Panama Canal Expansion project is 93.8% complete. But what will the completion of this project mean for the public refrigerated warehousing industry?
In anticipation for the canal expansion, larger shipping vessels, referred to as “Post Panamax” ships are increasing in popularity. These vessels have the capacity to transport nearly three times that of previous cargo ships. These larger ships are expected to carry nearly 60% of all inventory by 2030. They allow shippers to import and export larger quantities of goods, utilizing economies of scale to spread shipping costs over larger quantities of units. PRWs may see small reductions in shipping costs with these Post Panamax vessels.
In response to the Panama Canal expansion, the U.S. plans to modernize many ports, spending an average of $6-8 billion each year. This will allow cold storage operations to expand their distribution networks to new localities and move larger quantities of goods. Traffic will also shift among these existing U.S. ports with 10-25% of traffic moving from west to east.
These changes to U.S. ports will also drive change in temperature controlled distribution networks. Rather than have one centralized super facility, PRWs will shift towards a hub and spoke style with many smaller DCs throughout their network. This helps to improve delivery times, reduce costs and improve customer satisfaction.
All of this leads to significant overall growth for the public refrigerated warehousing sector. Worldwide, PRWs will reach 552 million cubic feet of storage space, 92 million more than only two years ago. This is due to the distribution network changes made possible by the canal expansion.
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