The Neo-Panamax and New Jersey: Why Companies with a New Jersey Location Should Take Notice
When the MOL Benefactor arrived at Port Bayonne on July 8, 2016, it marked the beginning of a new era for international commerce and trade.
The containership, which began its voyage at the Port of Qingdao in the People’s Republic of China, was the first vessel to traverse the widened and deepened Panama Canal, which celebrated its long-awaited opening on June 26, 2016. At 10,000 twenty-foot equivalent unit (TEU) capacity, the MOL Benefactor was the largest containership ever to dock at a New Jersey port, but wouldn’t be for long.
A $1.3 billion project to raise the clearance of the Bayonne Bridge, which began in 2013, was completed in 2017. The project elevated the bridge’s clearance from 150 to 215 feet to accommodate the largest neo-Panamax ships. As a result, in June 2017, containerships carrying up to 18,000 TEUs were given authorization to navigate beneath the bridge to access Port Newark and Port Elizabeth in New Jersey.
On September 7, the cargo vessel T. Roosevelt arrived in Port Elizabeth. At 14,414 TEUs, four times bigger than the Statue of Liberty and even four times longer than a football field, it was the largest vessel ever to dock at an East Coast port. Larger containerships will follow in the neo-Panamax era.
Why should companies take notice? The widening of the Panama Canal ushers in an era of big ships and big opportunities. Companies with a New Jersey location are well-positioned to capitalize on this exciting new era.
Logistics Shifts Create New Opportunities
New Jersey has long been an attractive place for companies due to its strategic location in the heart of the U.S. Northeast corridor, providing easy access to one of the most concentrated and affluent consumers markets in the world. In fact, the State’s strategic location is one of the key reasons a growing number of ecommerce and companies that rely on same-day delivery choose to locate or expand here. It’s where the people are.
A distribution center in central New Jersey can serve over 22 million consumers within a two-hour drive. These potential customers collectively have nearly $800 billion in disposable income. In fact, more than 25 percent of all retail sales in the U.S. occur within 300 miles of the Ports of New York and New Jersey.
Easier, faster, cheaper access to this highly concentrated market is also one of the reasons why the U.S. Department of Commerce predicts as much as a 10 percent shift in container movement from West Coast to East Coast ports. The Port of New York and New Jersey, ranked the #1 port on the U.S. East Coast, will be getting the lion’s share of the business. Many logistics experts also are predicting that the Panama Canal expansion may shift trade routes from the Suez Canal, allowing ships to reach Asia or East Coast ports several weeks faster.
What does this mean for companies with a New Jersey location? Delivery speed combined with the ability to ship and receive goods on containerships three times the size of traditional cargo vessels can result in significant reductions in international shipping costs. It opens up new opportunities for manufacturers and exporters that are considering expansion into Asian markets. It also makes it more cost-effective for importers to procure products from Asian countries to capitalize on the growing demand for multi-cultural specialty products. For example, since shipping timelines can be reduced by weeks, importing fresh food products from around the world becomes more practical.
Additionally, access to New Jersey’s Foreign Trade Zones (FTZs) will continue to help companies keep costs in check by deferring the duty on goods until they leave the Zone. Port Newark/Elizabeth Marine Terminal’s FTZ 49, which spans 2,075 acres, is one of the largest contiguous foreign trade zones in the U.S. The value of foreign merchandise received through FTZ 49 already exceeds $22 billion annually and is expected to grow.
Infrastructure Improvements Benefit All New Jersey Companies
The Port Authority of New York and New Jersey, along with its shipping terminals, container ship companies and railroad, have been gearing up for the arrival of neo-Panamax vessels in Ports Newark, Elizabeth and Bayonne for several years. This preparation has resulted in a series of infrastructure improvement at the Ports and beyond that give all New Jersey companies a competitive advantage, whether or not they plan to take advantage of the opportunities presented by the Panama Canal widening.
In addition to raising the Bayonne Bridge’s clearance by 65 feet, the Port Authority and the Army Corps of Engineers embarked on a $1.6 billion harbor dredging project, which also has been completed.
The Port Authority has been building out ExpressRail in Port Newark to double the Ports intermodal capacity to facilitate sea/land connections that get products to market faster. CSX Railroad, a vast cargo network that includes more than 23,000 miles of track, also has been investing heavily on infrastructure improvements at the New Jersey Ports to ensure they are ready for increased shipping volume.
Forward-thinking companies are expanding cold store warehousing capacities near the Ports in anticipation of increased volume. In fact, the total industry growth in New Jersey increased by more than 20 percent since 2012, according to the most recent International Association of Refrigerated Warehouses Global Cold Storage Capacity Report. The advantage: Food and other companies that require cold storage space will have access to facilities that can accommodate larger shipments from neo-Panamax vessels.
More than $250 million also was invested to expand roadway capacity into and out of the Ports. That expenditure does not include an investment of $2.3 billion on the New Jersey Turnpike widening project, which was the largest ongoing roadway project in the Western Hemisphere. The project included approximately 35 miles of road improvements from Middlesex through Burlington counties to alleviate potential traffic from the Ports, as well as points north and south. The New Jersey Turnpike (Interstate 95) is the primary north/south Interstate along the U.S. East Coast.
Infrastructure improvements, such as the widening of the New Jersey Turnpike, not only improves the logistics capabilities of companies that rely on the ability to get product to retailers and consumers quickly. For companies that require access to the lucrative New York Metropolitan area market, but require more space, the improvements to the New Jersey Turnpike/Interstate 95 also expands our State’s industrial market more than 30 miles, offering companies a wider, more affordable menu of buildings and sites from which to choose. For example, Junior’s, the New York City institution famous for “The World’s Most Fabulous Cheesecakes,” moved its baking operation from Maspeth, Queens, to a larger facility in Burlington, New Jersey. The 103,000 square-foot facility is nearly 5 times the size of the prior New York facility. Affordability was a key factor in the company’s relocation decision.
Driving New Jersey Economic Growth/Creating New Opportunities
There already has been a flurry of activity in and around New Jersey’s ports as a result of the neo-Panamax era – from an increase in seaborne cargo deliveries to an uptick in industrial real estate development – that is bringing economic growth to our State.
The Port of New York and New Jersey saw volume jump 7.6 percent year-over-year (May 2017 vs. May 2016.) Industrial development and leasing activity also has been surging, especially in markets adjacent to the Ports. In the first half of 2017, 5.1 million square feet of new space was delivered to the New Jersey market, which already exceeds the 4.2 million square feet of new space delivered in 2016, according to Cushman & Wakefield. New Jersey has become the second fastest-growing logistics market in the world, based on CBRE research.
This surge in activity has attracted jobs and investment to New Jersey that has both an immediate and long-term impact on our State’s economy. It also will have a positive effect on New Jersey’s logistics supply chain, making it easier for businesses of all types to access the suppliers, vendors and partners they need to grow.
Companies with a New Jersey location will be well-positioned to capture new opportunities in the neo-Panamax era. Are you ready?