LOS ANGELES — Large shifts in cargo from the West Coast to the East Coast resulting from completion of the Panama Canal expansion in 2016 are unlikely, Moody's Investors Service said in a report.
"In most cases, shipments from Asia to West Coast ports will arrive at inland destinations faster than via an all-water route to the East Coast through the Panama Canal," according to the report, "Panama Canal Expansion: West Coast Ports Maintain Advantage, but East Coast Municipalities Benefit."
West Coast ports also have contracts containing minimum annual guarantees to protect their cargo volume, revenue, and credit quality, according to Moody's.
"However, ongoing labor and operational difficulties at West Coast ports could shift cargo traffic if not resolved," the report said.
Moody's believes local governments near East Coast ports will economically benefit if they have both the water depth to accommodate larger ships and the intermodal transportation connections. Cities most likely to benefit are Norfolk, Va., Savannah, Ga., and Charleston, S.C. These municipalities have also not borne the costs of adjusting their ports for the larger vessels.
"Even a muted uptick in cargo volume from Panama Canal activity will provide at least some increased revenue for local governments," the report said.
While only a minimal impact for East Coast ports' cargo volumes is anticipated, Moody's says it's enough to increase revenue for these local governments. Preparation work going on at the East Coast ports has already created economic activity that benefits the local governments, Moody's said.
In the longer term as cargo volumes grow, more cargo will head to ports readied for the larger ships on both coasts, the report said. This additional traffic, as well as relocated or new businesses such as distribution centers, will bring permanent jobs and benefit the local governments of these East Coast ports with growing tax revenues.