Important! The New, Expanded Panama Canal; What it Means for the Toy Industry

Headerf Panama-canal-cosco-container-june-26-2016The First Container Ship Passes Through the Newly Expanded Panama Canal

A new, enormous class of container ship will be able to pass through carrying up to 14,000 containers. That is almost five times the current ships which hold an average of 3500 containers. 

The expanded Panama Canal has just opened for business; an event that will have a major impact on the toy and play industry. By widening the canal, a ten year, $5.4 billion project, a new, enormous class of container ship will be able to pass through carrying up to 14,000 containers. That is almost five times the current ships which hold an average of 3500 containers. 

These sea going behemoths, called Neo-Panamax ships, measure close to 1,000 feet in length (larger than a football field) so the widening was necessary to allow them passage without going around the tip of South America. The wider canal will mean that east coast companies can avoid unloading in ports like Long Beach, California and having to ship overland. This will result in four major benefits for the toy and play industry:

    1. Major time and cost savings as east coast companies will no longer have to unload on the west coast and ship overland by truck or rail.

    2. A reduction in freight costs due to the larger container ships providing economies of scale.

    3. Reduced seasonal backups because the west coast ports will have less traffic fighting to get access to land and unload.

    4. Less exposure to west coast strikes because carriers can, if necessary, redirect to the east coast.

Bottom line the expanded Panama Canal will provide cost savings to consumers and security to toy companies and retailers in the knowledge that products will make it to store shelves in time for Christmas.

2 thoughts

  1. Thanks for raising this subject. Reality remains to be seen what if any benefits do result. Why you ask?
    Generally it takes 11-13 days to ship from China to the west coast ports but 25-28 days to get to the east coast. The canal does not remove all of that difference as smaller ships with toy cargo already transit the canal.
    The larger container ships don’t help if ports can’t handle them. And only a handful of east coast ports have dredging to accommodate. West Coast ports are struggling with off-loading the new huge ships, cargo sorts, available chassis, trucking and the like.
    The “Alliances” in shipping have broken business models. Freight costs can’t go down much further. Some large companies are paying rates that are actually below the cost of carrying the container overseas. The little guy therefore gets stung.
    Today in Reuters, “Container shipping has seen a wave a mergers and acquisitions, particularly in Asia, as companies try to grab a bigger share of a depressed market. The industry is suffering its worst downturn since its origins in the 1950s and 1960s due to a combination of weak consumer demand and overcapacity.”
    LA/Long Beach will always be crucial ports for our industry and others. Exposure will always be there, unfortunately. And, East Coast ports have had their own labor issues in the past and will again in the future.
    Finally, an article link from today’s TIA Credit Daily Bulletin — Panama Canal : Freight Boom or Bust for East Coast Trucking? http://tiaci.informz.net/admin31/content/template.asp?sid=49626&brandid=4160&uid=1062980532&mi=5713778&mfqid=28191559&ptid=0&ps=49626
    Most companies report to us that they’re still focused on LA/LB regardless of the canal. This will certainly be an evolving subject where we should all keep communicating to the toy community. Stay tuned and thanks again!

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