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News release

SYDNEY

Panama Canal expansion provides global freight efficiencies via ‘supertankers’

• Global trade demands efficiency gains with speed to market and transport volume
• In NSW, freight and logistics is set to become more efficient with the expansion of Port Botany and development of the Intermodal Logistics Centre at Enfield


SYDNEY, 22 May, 2013 – The expansion of the Panama Canal is enabling the use of massive ‘supertankers’ across the globe to achieve transport efficiencies that are in demand.

The 77.1 km Panama Canal, which connects the Atlantic Ocean via the Caribbean Sea to the Pacific Ocean in Central America’s Panama, is a central thoroughfare for international maritime trade. There are currently two “locks” or channels that are 33.5 m wide, and now a third, wider lane of locks is being built to enable a new generation of container ships dubbed ‘supertankers’ or “post-Panamax” vessels.

According to Jones Lang LaSalle Research, this new generation of transport including Maersk Line’s Triple-E vessels, Airbus A380 and the Boeing 787-8 Dreamliner aircraft, will drive a re-rating of selected destinations and transport nodes, impacting on global and local freight patterns.

Maersk Line’s $190 million Triple-E vessel is the largest ship in the world, at 400 metres in length and able to carry 18,000 twenty-foot equivalent units (TEUs). It’s designed for efficiency, economy and environmental sustainability, however is too large for most global ports to take in due its size including getting through the Panama Canal until the expansion is completed.

Jones Lang LaSalle’s Rich Thompson, Managing Director for the global Supply Chain & Logistics Solutions team, said the expansion of the Panama Canal by way of a new, third set of locks is a reaction to the growth and evolution in the global movement of goods and materials by shipping container.

“In the US, the larger “Post-Panamax” ships that will be able to transit the expanded Canal will carry more TEUs through on each trip – double the number that can pass through today, realising significant economies of scale for carriers and shippers alike.

“In a world of ever-increasing transportation costs, more demanding customer service requirements, and increasingly important sustainability issues, we expect these operational considerations to have an impact on industrial real estate – plants, warehouses and distribution centres – as companies need to re-evaluate their supply chain networks.

“The expansion of the canal has already sparked competition for port market share and the need for capital investment in projects like channel dredging to accommodate larger ships with deeper drafts, but it also has the potential to shift the flow of goods as they are moved throughout the US – and thus warehouses and distribution centre locations will vary from the commonplace of the past few decades,” said Mr Thompson.

According to the US National Oceanic and Atmospheric Administration (NOAA) , 90% of international trade is carried out by sea, and in the US alone, the yearly waterborne foreign trade amounts to over 1 billion tons of sea freight worth USD625 billion.

The NOAA says around 7700 TEUs are carried on today’s megacarriers, which are about 347 metres in length.

Mr. Thompson said rising freight costs is one of the major challenges being faced by supply chain professionals globally today, emphasising the focus for companies on reducing freight transport costs.
 
“Our research figures show transport can account for as much as 50% of a company’s total operating costs. Gaining maximum cost efficiencies and providing fast and reliable delivery of goods are two key challenges many businesses are focused on. This is propelling interest in alternative, lower cost modes of transportation – including intermodal, rail and water.”

According to the NOAA, container ship transport has revolutionised the transport of goods over the last 40 years; but it’s just a part of a larger freight transport system which includes sophisticated shoreside terminals, intermodal extensions to inland points by rail and highway, and automated information systems that track a shipment through its journey.

Jones Lang LaSalle’s National Director, Corporate Industrial Solutions, Andrew Maher, also a member of the firm’s Global Supply Chain team, said in Australia, occupiers of the Industrial sector in 2013 are demanding greater efficiencies from their real estate, together with reduced transport costs and the seamless coordination of logistics.

In Sydney, Port Botany is receiving a major expansion, catering for long-term trade growth – one of the largest port projects in Australia in the past 30 years.

Mr Maher said Sydney’s long-term trade growth demands increased freight capacity, which the Port Botany expansion project is responding to.

“The new third terminal at Port Botany will have five additional berths, and improvements at the Patrick Port Botany terminal will almost double the capacity there for automation and increased stacking. The Moorebank Intermodal Terminal, a nationally significant infrastructure project, is also in the works, with a local and international call for registrations of interest announced ,” said Mr Maher.

The Moorebank Intermodal Terminal project is expected to generate approximately $10 billion in economic benefits through reduced freight costs, reduced traffic congestion and better environmental outcomes.

The use of rail throughout Sydney and greater NSW is increasing to offer efficiencies in freight and logistics, via the Intermodal Logistics Centre at Enfield – predicted to be finished in late 2013 – catering for central-west Sydney’s demand. A plan for a network of additional intermodal terminals in the central-west, south-west and west of metropolitan Sydney is also endorsed by the NSW Government to meet predicted demand.

According to Jones Lang LaSalle’s Q1/2013 Market Commentaries, there is currently only 309,600 sqm of projects under construction for 2013.

“Despite limited supply, numerous suitors are still looking for high-grade quality assets in the investment market, including domestic institutions, offshore groups and offshore mandates through third parties, syndicates and boutique fund managers,” said Mr Maher.

“We expect the ‘transport revolution’ driven by the need for greater freight and logistics efficiencies to support investors and tenants in the Industrial logistics sector going into 2013. Bigger and more efficient container ships coming onto the market will enable larger volumes of goods to be shipped in a much more streamlined, environmentally friendly and cost-efficient way.”

Mr Maher said the demand for larger container ships is increasing due to competition between destinations, cost and environmental factors, and the need for assurance of continuity of supply.

Figure 1: Q1, 2013 Industrial Supply figures for Sydney 

 
End notes
1. National Oceanic and Atmospheric Administration (NOAA) white paper: Changing Ship Technology and Port Infrastructure Implications. http://oceanservice.noaa.gov/websites/retiredsites/natdia_pdf/9vulovic.pdf
2. The Australian Government Moorebank Intermodal Terminal project http://www.infrastructure.gov.au/department/statements/2012_2013/files/NBII_MOOREBANK_FACTSHEET.pdf