November 04, 2015

Panama Canal: Logistics & Cargo Loss Risk


“Following the Panama Canal expansion, up to 10 percent of container traffic to the U.S. from East Asia could shift to East Coast ports by 2020.” The new white paper issued by C.H. Robinson and The Boston Consulting Group breaks down the anticipated changes to shipping logistics. There has been plenty of buzz around what should be an increase to shipping to East Coast ports such as New York, New Jersey, Baltimore and Norfolk. Even the ports of Miami, Savannah and Charleston should see some increases. West Coast ports are forecasted to see an increase in shipments, as well, but the growth rate will be slower. West Coast ports will always be the faster of the options, but East Coast shipments could see more competitive rates that will entice companies to go that route.

To handle this anticipated increase in shipping to East Coast ports, Savannah has invested upwards of $1.4 billion in infrastructure updates. Miami is investing $2 billion. The most advantaged? New York-New Jersey, Norfolk, Savannah and Charleston are all in a good position to gain a share of the increased traffic. Another reason for the infrastructure updates are the increased sizes of ships. As it stands, many ports are unable to accommodate these large ships.

Construction trends are showing larger ships are being commissioned more and more. These large, Triple-E  class ships will be up to 1,300 feet long. They will be able to accommodate 18,000 20-foot containers. They are as large as two football fields, two ice hockey rinks, and two basketball courts combined. There is some concern over what the new risks might be with these large ships.

  1. Hull and structure stress – Basic physics shows that usual stresses on structures increase as the size increases. Since these are new ships, it’s hard to know if they are inherently riskier than current cargo ships.
  2. Big ship = slower ship – These slow-steaming ships means increased exposure to risks. It will take these ships longer to get to their destinations and subject cargo to more handling.
  3. More cargo means bigger loss risk – If we’re looking at the possibility of total loss, the totals will be huge. Ships this big could be worth up to $1.4 billion, according to Robert Waterson, senior VP of marine at Lockton in London.

What does the Panama Canal expansion mean for your company?  Stay tuned for more Panama Canal updates as the expansion continues.

No matter the vessel size or destination, logistics providers should consider obtaining Cargo Insurance. Avalon Risk Management offers an “All-Risk” Cargo policy which offers the broadest form of coverage. Our flexible policies allow our customers to insure most commodities immediately and those requiring special quotes within a 24-hour turnaround time. With Avalon’s Cargo Insurance program, you’ll receive competitive rates, marketing support and exclusive Web Merlin™ technology to streamline certificate issuance.

For more information on Cargo Insurance, contact marketing@avalonrisk.com or visit our cargo insurance product page.

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