Panama Canal expansion to boost local businesses

HOUSTON — The greater Houston area is positioning itself for an influx of large shipments traveling through the Panama Canal and ending up in the Port of Houston.

Area leaders say:

Economic development

Kelly Violette, executive director of the Tomball Economic Development Corporation, said she foresees a huge benefit to Tomball from the expansion. With the TEDC’s recent acquisition of 96-acres of land for a business park, Violette said she has tasked consultants to look at companies that do distribution because of the nearby access of the rail line and the Port of Houston.

“A lot of companies are moving outside the beltway,” she said. “The access to [the port] is just as easy and the cost of land is less. We’re are also seeing more companies looking at quality of life issues. The bottom line isn’t just about money, it’s the quality of life for their employees.”

Distribution expansion

Jon Lindsay, president of the North Houston association—a business development organization—and former Harris County judge, said he expects more companies like Sysco to expand their distribution facilities in the area when bigger shipments come in from the Port of Houston.

“A lot of really big warehouse facilities are already going in on Beltway 8 from U.S. 59 to Jersey Village,” he said. “It is a better central location to ship from, and their customers are going to be more north—that is where the growth is.”

Increased visibility

Gary Fidelman, co-owner of Fidelco, a shipping container and international shipping consultant business, said the expansion will allow him to compete with companies in Jacksonville, FL and Los Angeles. He said there is a conception that Miami is the place for companies to go when shipping to the U.S.

“We are trying to woo a large, international company that brings in a lot of material from China,” he said. “They have been running into problems with space available in Jacksonville. We’ve been waving the flag for Houston and Tomball [because] Houston is central to the U.S., we have more space for warehousing and real estate is a lot less expensive.”

Reaping the benefits

A variety of local businesses in the greater Tomball area are forecasting profits from the Panama Canal expansion.

According to the Port of Houston Authority, chemical and retail industries will be the most affected.

“The petrochemical industry segments continue to be important [industries at the Port,] but the fastest growing have been consumer items for the retail industry,” said Maggi Stewart, spokesperson for the port authority. “Houston’s growing consumer base and our connectivity to the region by truck, rail and air are driving imported goods from Asia.”

When the expansion is complete in 2014, imported goods from Asia will be able to reach Houston more quickly and with less shipping costs.

These factors, paired with Tomball and Magnolia’s continued growth and demand for products, could contribute to a surge in business.

A multi-billion dollar expansion of the Panama Canal, which will allow bigger ships carrying more cargo to pass through the waterway, is expected to be completed in 2014. After ships are able to pass through the expanded canal, many will make their way to the Port of Houston, where they will unload their goods onto trucks and rail lines. These goods will then be sent onward to anywhere from the Houston suburbs to Chicago.

“The Panama Canal expansion is expected to enhance Houston’s competitive advantages, promote job creation and growth and revitalize the region’s economy,” said Maggi Stewart, a spokesperson for the Port of Houston Authority. “Since its beginnings almost 100 years ago, whenever the port has grown, Houston has grown.”

Expansion plans

The Panama Canal Authority began work in 2007 on its $5.25 billion expansion, which will allow longer and wider ships to pass through the waterway.

When the expansion is complete, cargo ships carrying 12,000 20-foot equivalent units—commonly referred to as TEUs—will be able to travel through the Panama Canal to Houston. A TEU is a container measurement; each TEU is the size of one container at the port.

Currently, the maximum ship capacity in the canal is 5,000 TEUs, according to Jeff Moseley, president and CEO of the Greater Houston Partnership, which recently organized a trip to Panama for Houston business leaders.

“That is a significant increase in tonnage that will come through Houston,” Moseley said. “We can only imagine how dramatically these trade numbers and the jobs created will impact this entire region.”

In preparation for this expansion, the Port of Houston Authority is increasing its capacity.

“Although the main Houston Ship Channel was deepened to 45 feet as well as widened several years ago, it is a priority to address the channel depth issues for both container terminals prior to the expansion of the canal,” Stewart said.

The Port of Houston Authority is also locking down its trade agreements with Panama. June 23, the port authority renewed its strategic alliance with the Panama Canal Authority until 2016. This alliance is meant to increase trade along the “all-water route” from Asia, through the Panama Canal and ending at the Port of Houston.

“According to the Panama Canal Authority, Houston will be one of the U.S. ports most positively impacted by the canal expansion,” Stewart said. “The Panama Canal has become an increasingly important corridor linking Asian manufacturers to the Houston area…Asia [is] our fastest-growing market segment and the booming part of our container business.”

Bigger business

With the expansion of the canal and the growing population of Houston, the Port of Houston is anticipating having 4.5 million TEUS move through its waters annually by 2030.

Approximately 1.8 million TEUs currently pass through the port each year, making the 2030 projection a 150 percent increase from present-day levels.

Because of this increase, many Houston-area companies are predicting a surge of business. Even in Tomball and Magnolia, businesses, particularly in the chemical and retail industries, that receive rail and truck shipments from the port are expecting a boom.

“We will become a natural [shipping] gateway to 100 million Americans in mid-America stretching to Chicago,” Moseley said. “Just Texas alone and the tremendous growth that will take place here show a dynamic demand for tonnage in the Port of Houston.”