Speed Is Key for Railroads, Ports in 'Post-Panamax' Era

Yet Urs Dur, shipping and logistics analyst for Lazard Capital Markets, said he believes shippers will swap time for money when considering the all-water option the expanded canal will provide.

STR | AFP | Getty Images It is estimated the Panama Canal's eight-year long expansion project will cost $5.2 billion.

“They will do so because it will be cheaper and frankly because it’s faster,” Dur said. “I suppose you can probably beat it to Tampa but not by much.”

Battleground

Any sense of regionalism could be near its end as a number of the rails move towards establishing and expanding operations in the Southeast, a region that is particularly well-suited for first-call ports.

“Frankly, it would serve a line well that would go through the canal to stop in the Southeast and offload the Midwest freight,” said Finkbiner. “It gives the Southeast ports a market they’ve never had before.”

Virginia-based Norfolk Southern

NSC loading...

Quote  |  Chart  |  News  |  Profile

[NSC  Loading...      ()   ], which last year opened the Heartland Corridor network out of the Port of Virginia while also expanding a Jacksonville facility, says it is placing heavy focus on terminal capacity in its Southeast approach.

“We’ve designed our network around making it work either way,” said Jeff Heller, group vice president of international intermodal for Norfolk Southern. “East Coast/West Coast is someone else’s decision.”

Burlington Northern, meanwhile, opened a new intermodal facility in Memphis last year, a “gateway” city that has become a “very important distribution center,” according to Lanigan.

Scarce Funds

Looming large in the future of the Southeast ports, however, is a challenge facing ports around the country, on every coast—the desperate need for significant infrastructure investments.

These projects, which range from dredging waterways to installing larger cranes, are heavily dependent on federal funding and many currently risk going unfunded in time for the expanded canal.

Today, the Port of Virginia is the only East Coast port that can accommodate the larger fully-loaded Post-Panamax ships, a likely reason for the origination of Norfolk Southern’s Heartland Corridor out of the Port. (Charleston, currently dredged to 45 feet, can handle the Post-Panamax ships, but not when they are fully loaded.)

In Georgia, Governor Nathan Deal has loudly appealed the Obama administration for federal funding to deepen its Savannah port. The governor has said the state needs $105 million in federal funds for the project, however Obama’s recent budget proposal allotted it just $600,000 in engineering and design funds.

Funding and other uncertainties suggest it will be a high-speed race to the finish for U.S. transportation players looking for a piece of the Post-Panamax pie.

“Everything is kind of linked politically,” Citigroup’s Wetherbee said. “There are questions if they [East Coast ports] will be ready."

Clarification: A fuller quote from BNSF executive vice president and chief marketing officer John Lanigan has been added to the story to emphasize that the company doesn't expect the canal opening to have a big impact on their business.