There's a fascinating comparison of shipping costs through different ports that has not been given enough prominence and which Warren Buffett and aspiring shipping moguls would do well to study. The analysis gives a breakdown of the least-cost entry ports for the main commercial and distribution centers in the US, by port of origin, be it West or East Coast.

Hong Kong is one of the origin ports featured, and the study shows that Southern California is the cheapest as far east as Memphis and as far south as San Antonio. But, the surprise is that Seattle/Tacoma wins for Kansas (which is north west of Memphis), Minneapolis and Chicago. And for Dallas, LA/Long Beach is equal with Houston.

From Singapore, LA/Long Beach beat out Houston for the Dallas market and also is cheapest for St Louis and Chicago plus, wait for it, Houston itself. SeaTac wins for Minneapolis, Chicago and Kansas City.

Go back to the future and the wider Panama Canal in 2014, which means bigger ships and more all-water services. Everything changes. Denver and Chicago become the playground for Houston while a winding line of cities beginning at Minneapolis and ending at San Antonio becomes a cat fight, with Houston(via ISE) matched up against a range of West and East Coast ports.

This intense competition will put pressure on the West Coast to improve productivity, provide dependable labor and make sure that fees/charges do not rise. (Southern California seems to be taking that to heart– the $35/TEU fee that has been popping up for years, only to be knocked down by the Governator, is now being withdrawn.) Ports with a high degree of discretionary cargo (goods that go to or come from points outside the local region served by the port) will be at risk, because of the stiffer competition.

 On top of those requirements, rail pricing will become critical. 

That's not me spouting off or my analysis. It comes from a veteran economist, Dr John Martin (Martin & Associates), who gave a presentation to Pacific North West ports some time ahead of Buffett's swoop into BNSF.

He strongly advises the West Coast to improve the use of space ("terminal densification") from 5,500 TEU per acre. "Studies indicate that terminal density can increase to 8,000 TEUs an acre and eventually to 11,000 TEUs an acre without major changes in operating structures and without terminal automation." (East Coast ports are much worse off. Dr Martin estimates that the average for the 12 main ports is a woeful 3,200 TEU per acre.)

All in all, Dr Martin shows that the changes in economic fundamentals are becoming so rapid that no port can be complacent about its future.