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MBA International Business; traveled eight countries; novice in four languages
  • Snap Shot Of Panama Canal Trend To U.S. Ports

    The expansion of the Panama Canal could not come at a better time as the economy continues its path to a slow recovery. The Panama Canal is scheduled to complete its opening of it third set of locks, allowing larger Super-Panamax ships with more containers through the channels by 2014 according to the Panama Canal Authority , this project is expected to achieve long-term sustainability, economic growth, an increase in competitiveness, and meet the desired market segment needs expecting to generate a 12% internal rate of return from its expansion. Considering the impact this will have on the ports in the United States and the localities, the increase in business is well anticipated.

    The United States current trade deficit, reported in the U.S. Bureau of Economic Analysis for the month of May, is $48.7 billion, reporting an increase in exports of $0.4 billion and a decrease in imports by $1.6 billion. This early read of the economic activity provides a snap shot of the goods & services and the trading volume to business trends throughout U.S. regional ports.

    These trends play an important role into the logistics of competitiveness for business as the Panama Canal expands. Take for instance the top leading ports in California, the Los Angeles and the Long Beach ports. Both ports rank the top for twenty-foot equivalent units (NYSE:TEU) volume and have generated about $5 & $6 billion in state and local tax revenue from port usage. As the Panama Canal expands, bringing in more business to these ports, California is investing in expanding their port facilities to meet the new demand from this expansion and compete for businesses. This is the current trend for ports looking to compete for further business in their ports.

    Other ports such as the Port of Norfolk Virginia, having a great advantage when the Panama Canal is completed as this port has the largest and fastest container cranes in the world and has its deep-water harbor capable of handling these Super-Panamax ships which the Norfolk Port generates more than $250 million on average each year and is anticipating an increase in future opportunities to the intermodal routes and local businesses.

    As an increase in port activity occurs, thus the responsibilities of state and local municipalities' increases as well. As states face multiple ongoing financial challenges, municipalities are left to deal with its reality of short comings. With the Panama Canal shifting business volumes and increasing possible traffic usage, local governments will bear the burden of additional wear and tear to highway and street maintenance. As a result, localities have sought out public-private partnerships, placing tolls on roads in order to compensate costs as a long-term solution. Giving that this is an ongoing trend, the Congressional Budget Office recently reported the proposal of a national infrastructure bank to raise money to fund transportation projects, hence giving state and local governments a centralized option by creating opportunities to compete for funding.

    As the Panama Canal complete its expansion, opportunity for local and state ports investments will see an increase in activity for business opportunities as these Super-Panamax ships seek their best option for economies of scale through logistics.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jul 29 10:48 AM | Link | 2 Comments
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