Coyote News

By Cole Epley  |  Editorial Intern

[Memphis Business Journal]  December 16, 2011 — When the Panama Canal expansion concludes sometime during or after 2014, the Big Ditch will have effectively doubled its capacity and will be ready to facilitate passage of post-Panamax vessels, which can carry more than twice the container load of Panamax vessels. More importantly, the expansion will provide high-volume shippers direct access to the Gulf of Mexico and the Eastern Seaboard.

Will this access translate to an immediate, pronounced increase in shipping volume in the Mid-South and Southeast?

Local experts argue against the proposition, saying, among other things, it’s too soon to tell.

The way William B. Dunavant III, president and CEO of Dunavant Enterprises Inc., sees things, the expansion will at least provide shippers a viable alternative to the West Coast. Ports at Long Beach and Los Angeles, for example, are convenient to Asian shippers geographically and do to their ability to accommodate post-Panamax ships — an attribute boasted on the East Coast only at Norfolk, Va.

Whatever may change, Dunavant says, it won’t be overnight.

“If the canal opens in January 2014, would we see a 10 percent shift in freight? Absolutely not,” Dunavant says. “I think what you’re going to see is any major shift to freight probably taking three to five, maybe six years.”

In the meantime, Dunavant and other third-party logistics providers have and will continue to position themselves for whatever changes the expansion may bring.

In the two years since Dunavant sold out of the family business of cotton merchandising, the company’s global logistics group has acquired interests with terminals in Houston and along the East Coast. These acquisitions have allowed the company to remain bullish about intermodal.

“We believe in getting containers off the road and on the rail, but we also have the capacity from a trucking standpoint with the ten terminals we operate to deal with capacity,” Dunavant says.

Coyote Logistics LLC, as a non-assets based 3PL, is also uniquely positioned in that it inherently acts as a buffer in times of volatility or uncertainty.

“Any time we see a market shift … something like what the Panama Canal widening project is going to do, we excel in working with shippers and giving them the ability to postpone their decision-making,” says Chris Pickett, chief strategy officer at Coyote. “They won’t need to go out and shed or add private fleet assets if they know we can support them at very little notice.”

But the uncertainty surrounding the expansion’s impact has fueled speculation among all modes of transport, according to Martin Lipinski, director of The Intermodal Freight Transportation Institute at the University of Memphis.

“As an example, many are saying the railroads will counteract water flows for shipping by lowering rates and not diverting to water, but that’s still unknown,” Lipinski says.

Union Pacific Railroad spokesman Tom Lange, meanwhile, says the railroad anticipates a minimal impact from the expansion.

“Our feeling is anything that’s time-sensitive is still going to need to move on the rails,” he says.

Lange offers examples of rail’s speed and efficiency as support and also points to the billions of dollars in investments needed for infrastructure improvements at harbors up and down the East Coast. But he also raises another important question: what kinds of new fees will shippers be required to pay for passage through the canal?

While the Panama Canal Authority has yet to offer an indication as to how much passage will cost, 3PL providers will continue to position themselves strategically to account for any recalibration of shipping volume. Dunavant, in particular, remains focused on all modes of transport.

“The trucking industry is not going away, but the expansion could lead to shorter lengths of haul. With the driver shortage, that weighs in as well,” says Richard McDuffie, chief operating officer for Dunavant Global Logistics Group. “But you’ve got to look at the whole picture and each mode — ocean, rail and truck. We want to position ourselves to take advantage of all three moving forward.”

cepley@bizjournals.com  |  (901) 259-1730