Panama Canal Expansion Won't Bring Economic Boost To U.S. Ports, Analysts Say

February 2005. Panama Canal, Panama. (Photo by Javier Teniente/Cover/Getty Images) (Getty)

Cities on the U.S. East Coast from Baltimore to Miami have been pouring millions of dollars into an effort to expand their ports ahead of the scheduled completion of the newly widened Panama Canal and the boost in shipping expected.

Some analysts, however, warn that these expectations may not actually be all these cities hoped for.

"It's not going to be there from the canal," said Ed Sands, global practice leader at the transportation procurement firm Procurian. "Places like Florida don't have the distribution activity that the big cargo ships need so I don't really see them going there even if the harbors are deeper."

Shipping experts cite a number of reasons why these ports won’t see an increase in trade and boost to the economies in their respective cities. From larger ships that the canal can’t handle to a leveling off of the global shipping industry to cheaper costs of ground shipping, ports may not be in for the boom they hope.

"The cities have unrealistic expectations when it comes to the canal expansion," said Jean-Paul Rodriguez, professor of global studies and geography at Hofstra University. “There may be some shift in cargo going to the eastern U.S. ports because of the canal expansion and their improvements, but it's just not guaranteed."

The canal expansion will cost $5.25 billion with the funding generated from canal traffic taxes and tolls. The average cost per ship in tolls is $32,000 and is expected to rise when the construction of the expansion is complete.

Despite 70 percent of the nearly 14,000 vessels that pass through the canal yearly heading to the U.S., the largest Asian suppliers, especially China, go to West Coast ports and ship overland by truck or train to the East Coast. Only about 20 percent of China’s exports to the U.S. head through the Panama Canal.

Another issue for U.S. eastern ports is the depth of their waters and the inability to handle the so-called Post-Panamax ships. While West Coast ports are generally in deeper water, the only East Coast port that can currently handle a Post-Panamax ship is in Norfolk, Virginia.

That’s why East Coast cities and the federal government that controls all U.S. ports are shelling out the funds in attempt to attract these behemoth boats.

"The Port of Miami paid $43 million for four super-sized cranes that can handle cargo from the larger ships," said Edward Easton, chair of industrial development firm The Easton Group, based in Miami. "Local government is spending $550 million on a tunnel that will enable tractor-trailers to go from the port directly to I-95."

In New Jersey, the Port Authority has plans to raise the Bayonne Bridge about 60 feet higher to allow the larger ships to pass, and South Carolina will throw $2 billion over the next 10 years to upgrade the port.

Despite the warnings from analysts, others in the shipping industry say that the port expansion process is a risk that cities will have to take in the long run if they hope to be competitive.

"There's no question it's a gamble to do all these port improvements," said Chris Davis, a maritime lawyer who has lived in Panama. "But the bottom line is there is a need to expand the canal to handle the bigger ships.”