Warehouses holding everything from beer kegs to frozen chickens crowd the roadside along Highway 146 south of Houston, and a ferocious building boom is adding acres more, thanks to an even bigger project 1,800 miles away in Panama.

A $5.25 billion plan to triple the Panama Canal's capacity finishes in 2014, opening the way to Houston for mega-sized cargo vessels that can't squeeze through the canal's current locks and don't want to steam around South America.

The prospect of bigger ships, and more of them, could be a boon for the Port of Houston, which already handles more foreign tonnage than any other U.S. port.

With an eye toward feeding the U.S. consumer's insatiable demand for Asian-made goods, U.S. retailers like Wal-Mart Stores Inc and Home Depot have built millions of square feet (hundreds of thousands of square meters) of warehouse space around Houston ports.

They're popping up every place, said Jimmy Jamison, director of operations at the Port of Houston Authority, referring to the warehouses. If they wait until the Panama Canal expansion, that property won't be there.

Many such warehouses were built on spec, or without a dedicated tenant, and many are vacant.

Port officials expect spare capacity to disappear once the Panama Canal opens two new sets of locks -- the first major expansion since the canal opened in 1914. The locks will give massive container cargo ships from giant Asian exporters like China an all-water route to Gulf Coast ports like Houston.

At present the biggest cargo ships from Asia must unload their goods onto trucks or rail cars on the U.S. West Coast, or travel via the Suez Canal to the East Coast.

After the expansion, shipping containers unloaded onto Houston's docks -- which now go mainly to other Texas cities like Dallas and San Antonio -- could end up in U.S. Midwestern cities like Chicago. Houston is the closest U.S. port to the Panama Canal.

The canal widening could spark a shift in global shipping patterns and could lessen the reliance on West Coast ports like Los Angeles and Long Beach, which have long dominated the U.S. market for unloading cargo containers.


Other ports on the Gulf Coast and East Coast -- including New Orleans, New York, New Jersey, Georgia and South Carolina -- are weighing expansion plans to lure the super-sized ships.

It's really a game-changer, said Chris Bonura, spokesman for the Port of New Orleans, referring to the canal expansion.

U.S. imports from East Asian nations like China and Japan are valued at about $410 billion a year, and about half of that is handled by ports in California, Oregon and Washington, according to the Greater Houston Partnership business group.

But about 70 percent of cargo unloaded on the West Coast is sent via trucks and railways to markets east of the Rocky Mountains. That creates an opening for ports like Houston to extend their reach into the Midwest.

The expansion that is going on in Panama has got the Port of Houston written all over it, said Jeff Moseley, president of the group.


To the east of Houston lies Cedar Crossing Business Park in Baytown, the largest industrial park in Texas, which houses warehouses owned by Walmart, Home Depot and others.

Walmart's 4 million-square-foot (370,000-square-meter) facility at Cedar Crossing, opened in 2005, is one of the largest such facilities in the world. A Walmart spokesman declined to comment.

We can all agree that they are kind of the king of logistics, Moseley said of Walmart, calling its decision to locate in Houston a loud resounding validation of this strategic location.

Home Depot operates a 750,000 square-foot (70,000 square-meter) distribution center in Cedar Crossing, but most of the cargo housed there currently arrives via railroads from the West Coast, said Jeff Siewert, Home Depot's director of international logistics.

Home Depot, which imports goods from about 30 Asian countries including China, Vietnam and Thailand, would consider a water-borne route to Houston if its shippers offered one, Siewert said. As we think about our opportunities to ship all-water into Houston, that has always been on our radar screen, Siewert said.


Some U.S. analysts have predicted that about 20 percent of cargo ships now serving West Coast ports could divert to Houston once the canal is widened to handle a huge new breed of container vessel known as post-Panamax ships.

There is going to be some marketshare gain, said Paul Bingham, managing director at IHS Global Insight, an economic forecaster, who pegged the diversion rate at 5-10 percent.

About 14 percent of container traffic handled by the Port of Houston comes through the Panama Canal, a percentage that port officials say could grow to about 25 percent by 2020.

The port will spend about $1.2 billion to expand its Bayport Container Terminal to enable it to handle about 1.4 million containers per year. The port is buying giant cranes capable of unloading post-Panamax cargo ships, which can carry up to 12,600 containers, almost three times the current number.

(Editing by Howard Goller and Eric Beech)