Panama Canal Expansion Could Bolster Virginia’s Economy If State Attracts Larger Ships

January 23, 2013

With the Panama Canal being widened and deepened to handle super-sized cargo vessels, major ports on the U.S. East and Gulf coasts are positioning themselves to compete for possible significant increases in their share of world trade, especially with Asia.

The strategically placed and equipped Port of Virginia at Hampton Roads stands out among all as exceptionally well-prepared to play a leading role in new international trade developments, according to an analysis in the current Virginia News Letter, published by the University of Virginia’s Weldon Cooper Center for Public Service.

Set for completion in 2015, the canal expansion could potentially boost Virginia’s economy through increased shipping, manufacturing, over-land distribution and infrastructure development, according to Sara E. Russell, a maritime trade scholar at Old Dominion University and author of the Virginia News Letter article. Each of those sectors of the Virginia economy could see significant job creation, she said.

“Virginia has been far-sighted” in preparing its port, she writes. It is fully ready now “to handle new cargo from the shoreside to the landside, with deep water, state-of-the-art terminals and accessible inland connections.”

A realistic assessment, she added, is that several key U.S. ports, including Hampton Roads, Charleston and Houston, as well as Caribbean ports such as Kingston in Jamaica, will share in the increased trade rather than dominate it.

Furthermore, Virginia can’t merely sit back and wait for cargo to arrive, Russell warns. “The Virginia Port, in partnership with the state’s economic development groups, must proactively work to attract the ships as customers.” This can be accomplished in several ways, she says; for example, through additional tax incentives for investments in on-shore manufacturing facilities and distribution centers adjacent to the port.

The Virginia Port has deep channels, room to expand, and is home to the world’s largest cranes, which deliver efficient cargo handling, she writes. Importantly, the port is well serviced by two major railroads, the Norfolk Southern and CSX, which have updated their infrastructure all along the Eastern Seaboard to handle more and larger containers and cargo. Hampton Roads has the potential to have inland trade connections far toward the West, she adds.

Another established option for shippers using the Port of Virginia is the James River Barge Service, the “64 Express,” which runs a container service between the terminals in Hampton Roads and the Port of Richmond. Barging allows cargoes to bypass congested Interstate 64 between the metro regions and also to move in a more environmentally friendly manner, she writes.

Which ports will dominate and how will the global trade patterns shift? “That is literally a billion-dollar question,” Russell writes. In her analysis, West Coast ports will continue to receive the bulk of Asian trade simply because of their large population centers and existing infrastructure. 

The remaining cargo could be handled in one of three ways, she writes. A Caribbean hub could play a major role, but would most likely add to the cost of handling goods shipped onward, she concludes. Or a major U.S. port could become a large central hub and distribute imports to surrounding coastal and inland facilities. But, “given that an East Coast or Gulf Coast load center option limits the competitiveness of the non-load-center ports and would require many of these facilities to become secondary ports, a more realistic option is that several key ports with well-developed infrastructures and quality services will receive smaller portions of the expected increased tonnage.”

The Panama Canal’s expansion will open up multiple ship routings and allow importers and exporters a way to use several ports to hedge against supply-chain disruptions, Russell added.

The Port of Virginia handles the eighth-largest cargo volume annually in the U.S. and ranks third on the East Coast, behind New York and Charleston. The Port of Charleston will require additional dredging and expansion to be fully competitive for larger cargo ships, Russell says.

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