Canal expansion bolsters trade here
Panama’s president will visit Port of Houston to mark 5 years of new markets and opportunities
The president of Panama, Laurentino Cortizo Cohen, visits Port of Houston on Thursday to mark five years since his country completed the expansion of the Panama Canal, which provided new markets and opportunities for Greater Houston’s industries and cemented the port’s standing as leading center of international trade.
The canal expansion has provided a gateway to fast-growing Asian economies for Houston’s vital energy sector, opening not long after Congress lifted a 40-year ban on crude exports at the end of 2015 and the first shipments on liquefied natural gas left the Gulf Coast in early 2016. After the expansion was completed, the value of Houston energy exports to Asia — excluding chemicals and plastics — more than tripled to nearly $13 billion in 2019, according to Commerce Department data.
The expanded canal, which pro
vides a shortcut from the Atlantic to the Pacific, has also established Houston as a key entryway for consumer and other goods from Asia and allowed the region to challenge West Coast for the import business. Since 2016, import containers moving through Port of Houston from East Asia have grown 63 percent, according to the port.
As a result, Houston has become a major a major distribution hub for retailers such as Walmart, Costco, Dollar Tree, Home Depot and IKEA. Since 2018, about 24 distribution centers have come to Houston, creating an estimated 6,400 new jobs, according to the Greater Houston Partnership.
“If you go back a decade or so, we virtually had zero container ships,” said Roger Guenther, the executive director of Port of Houston said. “Most cargo came through the West Coast and came into Texas by rail. (The canal expansion) has been a game-changer for Houston.”
Trade is a critical component of the local and state economies. Port of Houston estimates that trade moving through the Houston Ship Channel generates nearly 1.4 million jobs in Texas and $339 billion in economic activity.
Cortizo Cohen, elected in 2019, is expected to have a round table discussion with port officials on topics such as the port’s plans to widen and deepen the Houston Ship Channel to accommodate larger ships.
Win for LNG
Panama, which took control of the canal in 1999, launched the expansion project in 2007 to accommodate ever larger ships as international trade grew. The project, which cost an estimated $5.25 billion, added a third lane to double capacity and allow for more vessels and larger ships to pass.
One sector has particularly benefited from the expansion: liquefied natural gas. Before the expansion, the canal was too small for most LNG tankers.
“LNG just exploded,” said John Cypher, Senior Director-Americas for the Greater Houston Partnership’s International Investment and Trade division. “I would say in 2016 we were shipping about a $1 billion dollars of LNG, and now we’re at $3.5 billion.”
The canal expansion has helped Port of Houston compete for Asia-Pacific trade with West Coast ports such as Los Angeles and Long Beach, Calif. Over the past year, as Asian imports have flooded into West Coast ports, creating traffic jams and leaving ships to wait days or weeks to unload, Houston has become an attractive alternative, said Greg Holt, a shipping industry analyst for S&P Global Platts “There would have been much greater delays in shipments and general goods shortages during the pandemic period if larger vessels sailing from Asia were not able to access the U.S. Gulf and East Coast ports easily,” Holt said.
Michael Dyll is CEO of Texas International Freight, a Houston shipper that specializes in oil field equipment. Over the past year, as the pandemic disrupted supply chains, companies in the Asia-Pacific trade began seeking alternatives to crowded West Coast ports.
The Panama Canal expansion made Houston an option.
“This COVID problem has made people rethink logistics, so Houston and Texas are going to benefit from that,” Dyll said. “Initially, people may not have thought of it as a great entry into the U.S., but people are now thinking of it more.”
No. 1
Last year, the Houston Ship Channel was ranked the busiest waterway in terms of tonnage by the U.S. Army Corps of Engineers. More vessels call on Port Houston than the ports of Los Angeles/ Long Beach and New Jersey and New York combined.
Port of Houston is trying to accommodate the growing demand by launching a $1 billion project to widen and deepen the channel to handle larger ships carrying more cargo. The ship channel was last widened and deepened in 2005 — before the Panama Canal expansion project got underway.
“We need to stay in front of the demand of what ships need to call here,” said Guenther, the executive director of the Port of Houston. “Vessel sizes are growing larger to accommodate the growing industry.”