Supply Chain Action Points
Read this first — the conclusion, and the moves to make:
- Before 15 August, build the missing number: all-in door cost per FEU from a West Coast port to your DC, rail plus drayage plus carrying days, so the $2,750 spread lands on a real figure instead of a feeling.
- Price both coasts on the same basis, port to door; a West Coast port-to-port quote against an East Coast port-to-port quote stops being a comparison the moment the cargo has an inland leg.
- Cap any East Coast lock at three months unless a third draft cut is announced; the cause is seasonal and a twelve-month contract is the wrong duration for it.
- For dense cargo, book one sailing earlier starting with the first vessel after 15 August and get the roll clause in writing; a roll is seven days on a weekly string and fourteen on a fortnightly one.
- Recompute the spread on 15 September: above $3,500 the diversion maths has turned in your favour, below $2,000 the canal premium has been handed back and the lock should not be renewed.
The Panama Canal Authority will tighten maximum transit draft to about 14.78 metres on August 15, following a July 24 reduction to 14.94m, forcing neopanamax boxships to light-load by several hundred TEU. CMA CGM and MSC have already raised North America tariffs, and forwarders expect Asia-US East Coast spot rates to test $10,000 per FEU while US West Coast quotes climb from roughly $6,229 toward $7,250.
The Analysis
14.78 metres from 15 August, after 14.94 on 24 July. Neo-Panamax ships light-load by several hundred TEU a transit. CMA CGM and MSC have raised North America tariffs. Asia to US East Coast spot is expected to test $10,000 per FEU. And Asia to US West Coast, in the same breath, from about $6,229 toward $7,000 to $7,250.
That last clause is the most useful thing in the story and the one nobody quotes. An East Coast number is a level. A West Coast number beside it is a spread, and a spread is something you can decide with.
6,229 to 7,250 is 1,021, or 16.4%. To 7,000 it is 771, or 12.4%. Now the East Coast: if $10,000 is 10% to 15% above today, today is $8,696 to $9,091, so that leg is moving 10% to 15%. Both coasts are repricing inside the same band and the West Coast is at the top of it.
The canal does not touch the West Coast. Nothing about a 14.78-metre draft changes a Shanghai to Los Angeles transit. A lane with no physical constraint is repricing by 12% to 16% in the same week as a lane with one. Either the increase is demand and the canal is the reason carriers are citing rather than the reason the price is moving, or the two numbers were collected on different dates and bases and should not be subtracted at all. Both readings argue against treating this as a canal event.
The distinction is the whole decision. A canal-driven increase gives back when the water returns; the reporting around it frames this as El Nino, which is a rainfall problem, and rainfall problems end. A demand-driven increase gives back when the peak ends, which is a calendar fact. Lock twelve months against something that ends in October and you have bought the wrong duration, which is the most common expensive mistake in freight procurement and the least discussed.
Check the spread against the story. After the move it is $2,750 to $3,000, taking $10,000 against $7,000 and $7,250. Before the move, using the implied East Coast base of $8,696 to $9,091 against $6,229, it was $2,467 to $2,862. The spread widened. A diversion story predicts the opposite: enough cargo switching coasts would push the West Coast up faster and compress the gap. It widened, so the diversion has not been priced to parity, and the West Coast increase is not coming from the diversion either. The window is still open, and it will close on its own.
The whole diversion decision reduces to one number. $2,750 a FEU is what you pay to land on the East Coast instead of the West. If your all-in inland cost from a West Coast port to your DC, rail plus drayage plus the extra days of inventory, is below $2,750, the West Coast door is cheaper and the canal is somebody else's problem. If it is above, divert. You probably do not have that figure per FEU, because inland costs get quoted per container, per mile, per kilo or per week of chassis, almost never on the same basis as an ocean rate. That is a spreadsheet gap, not a market gap.
Who carries what. An East Coast importer with dense cargo carries the roll. An East Coast importer on a DDP signed in June carries the increment, $900 to $1,300. A West Coast importer carries 12% to 16% for a canal he never uses, and if he diverts he joins the queue already bidding up his own rate. An importer with light high-value cargo on a floating rate carries neither and will wonder what the noise is about. One headline, four exposures, and only one of them is a canal.
It lands in two waves. The rate lands on the first invoice after 15 August and it is already filed, so there is nothing to negotiate. The roll lands at the port when the loading list is cut, and it arrives without an invoice. On a weekly string a roll is seven days. On a fortnightly string it is fourteen, which is worth checking before you assume a week.
What the coverage leaves out is the control group. Every version of this story quotes the East Coast and treats the West Coast as background, when the West Coast is the cleanest available test of whether the canal is doing the work. It is not. A lane with no draft limit moves by the same percentage as a lane with one, both inside a band set by the peak. So the useful reading is not that the canal will push rates up. It is that rates are up and the canal will decide which coast absorbs the roll. Different problems, different fixes, and the fix for a roll is not a rate lock.
Assume 30 FEU a month, split evenly, and take the high end of both moves. My assumptions, not the article's. East: $1,300 times 15 is $19,500. West: $1,021 times 15 is $15,315. Together $34,815 a month, against a headline that names the East Coast as the problem. Then the diversion: 15 boxes times $2,750 is $41,250, before inland. That number is larger than the entire increase, which is why the diversion deserves an afternoon and the rate does not.
If you locked the East Coast in June, an all-in contract does not feel a draft cut and the last two months of increase are not yours. If you lock twelve months now, you own a water problem for a year. If you wait and the draft is restored in the autumn, the market gives back part of the move and the wait was right. Waiting costs the difference between today and September. Locking costs the difference between today and next June. One of those durations matches the cause.
Thirty-one centimetres of water is a three-month problem. A twelve-month rate is a year-long contract. Buying a year of cover for one afternoon of rain is how freight budgets get written and how they get wrong.
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