Energy, Infrastructure Shape Global Industrial Supply Chain

Mexico and inland ports in the United States will be among the chief beneficiaries of increased global trade and infrastructure, according to a new study by Cushman & Wakefield Inc. and commissioned by the NAIOP Research Foundation. At the heart of the changes in the supply chain is the cost of transportation. Despite the recent leveling off of energy prices, transportation costs are expected to continue their long-term rise, the report states. In a bid to offset the growing of shipping goods from Asia, many U.S. businesses are looking for alternative manufacturing locations closer to home. Energy and transportation considerations could also increase demand for logistics space and other facilities in the Midwest. “In a higher transportation-cost environment, a mega-distribution center strategy that depends on very large distribution centers to serve the entire country may be less cost-effective than a more integrated hub and spoke model that relies on smaller facilities closer to consumers,” the NAIOP/Cushman & Wakefield report states. This trend could boost such ports as Denver, Charlotte, Portland and Kansas City. A number of inland distribution centers will benefit from major investments in intermodal terminals, roads and rail projects, according to the study. Topping the list are Dallas, Chicago, Atlanta, San Antonio and Memphis. In addition, coastal ports in Southern California and Seattle/Tacoma will send more shipments to Chicago, Atlanta and Dallas. Another major force will be the $5.25 billion expansion of the Panama Canal. The project is expected to increase shipping volume from 279 million tons in 2005 to 508 million tons by 2025. In anticipation of the increased flow of goods through the canal, expansion projects are under way in Philadelphia, Charleston, Savannah, Jacksonville and Miami. And the Panama Canal expansion is also expected to increase cargo traffic at leading East Coast ports like New York/New Jersey, Savannah and Hampton Roads, Va. The West Coast presents some intriguing scenarios over the next few years. Mexico is seeking to compete with the Ports of Los Angeles and Long Beach, which receive about two-thirds of shipment volume to the Pacific Coast. But those ports have limited capacity for growth, and Mexican facilities offer less congestion and lower labor costs than its U.S. competitors. As a result, Mexico is positioning itself to further expand the volume of goods from Asia handled by its ports. At Puerto Lazaro Cardenas, for example, tonnage of shipments increased 68 percent in 2007. The port’s growth could be a plus for Kansas City, which is making big infrastructure investments of its own, the study notes. Moreover, an affiliate of Kansas City Southern operates an on-dock intermodal linking directly with the southern United States. Farther down the road, Mexico is making plans to capture a bigger share of shipping from Asia. At Punte Colonet, a village about 150 miles south of the U.S.-Mexico border on Baja California’s Pacific coast, a planned $4 billion, 27,000-acre deep-sea port is scheduled for completion by 2014.