Sometimes a single number can reveal a great deal about economic change. Last week, I learned of one such number from Tsuyoshi Yoshida, the head of the American business of the Japanese ship line MOL: in 2013, more than half the waterborne cargo from Asia to the U.S. East Coast passed through the Suez Canal.
Why is this important? For the past 20 years or so, China has been the world’s workshop, shipping out tens of millions of containers stuffed with everything from acrylic resins to zippers. If they are destined for the Eastern United States and traveling by ship, almost all of those containers cross the Pacific Ocean and pass through the Panama Canal to ports along the Atlantic and Gulf coasts. Cargo from China to North America doesn’t move via Suez, because the Pacific route is much faster.
But now, China’s manufacturing sector is struggling, with factory output at an eight-month low. As wages in China rise and credit gets harder to come by, makers of labor-intensive goods such as clothing and toys are relocating to cheaper locations in Southeast and South Asia. From newly industrializing countries like Cambodia and Bangladesh, the fastest route to the U.S. East Coast is through Suez, not across the Pacific. In just four years, according to Mr. Yoshida, the proportion of East Coast-bound cargo from Asia that transits the Suez Canal has risen from 39% to 52%, indicating how quickly the shift away from China has proceeded.
This shift has to be worrying to the Panama Canal Authority, whose ongoing expansion project will allow larger ships to pass through the canal by 2015 or 2016. The canal widening, which may end up costing $6 billion or so, is premised on an increasing flow of cargo from Asia to the East Coast. But if other Asian countries supplant China as sources of U.S. imports, the Panama Canal may face a challenge meeting its traffic forecasts.