Port Strikes, Panama, and the Future of Missouri Freight

Since last July, freight companies and the International Longshore and Warehouse Union (ILWU) (which represents dockworkers from all 29 West Coast ports) have been in negotiations over a new contract. In the last week, negotiations have heated up, with threats of port lockouts and counter threats of strikes. Half of all inbound and outbound U.S. freight use the ports in question.

At the same time, a $5.3 billion expansion of the Panama Canal, long delayed, is nearing completion. New locks that can handle much larger ships are expected to open in early 2016. The expansion will also increase the number of ships that can traverse the canal, decreasing congestion at this critical bottleneck.

While these developments are taking place more than a thousand miles away from Missouri, they may have a large impact on the state’s freight system. Currently, about 97 percent of the $1.2 trillion of freight that flows through Missouri does so by road and rail. That includes goods shipped to and from the West Coast as part of international trade movements. Despite Missouri’s access to the Missouri and Mississippi rivers, only 1 percent of freight by value move by barge in the state, and most public port authorities see little river freight.

But that could change. With the widening of the Panama Canal it may become cheaper freight to move large container ships directly to and from the Gulf and Atlantic Coast rather than rely on West Coast ports and cross-continent truck or rail networks. Labor unrest on the West Coast is reportedly incentivizing international freight companies to diversify their freight networks.

The hope among many Missouri transportation planners is that these changes to the international freight network will improve the competitiveness of Missouri’s freight network, and especially its inland waterways, by lowering costs and increasing reliability. For example, grain from Missouri could be put on barges down to the Gulf Coast where it could be directly shipped to Asia. MoDOT and other government bodies are looking at possible investments to take advantage of increased traffic.

However, the optimism should be paired with prudence. Freight experts at Missouri’s annual transportation conference have cautioned that the state lies in an area of the country where it is unclear whether the Panama Canal’s expansion will have great impact. Exporting internationally may become cheaper, but Missouri’s principle markets are likely to remain in neighboring states. Currently, only $12 billion of Missouri’s outbound freight is headed for international markets.

In terms of investment, Missourians should also remember that barge travel is inexpensive in Missouri partially because shippers pay very little of the cost of maintaining the navigable rivers on which they rely. If the Panama Canal expansion truly makes barge freight more competitive, barge companies should be able to afford new port investments without state funding.