West Coast ports doubt Canal will be cargo diversion factor

Aerial view of the Panama Canal
Aerial view of the Panama Canal

The Panama Canal expansion is almost complete. The last announcement from the canal authority put the level of progress at over 96 percent.
The inauguration of the expanded 101 year-old canal, which is imminent, has been anticipated by U.S. ports, especially on the East Coast. The expanded canal will triple the maximum size of containership that can call at those ports. The East Coast ports expect they will be able to attract more cargo transiting on bigger ships from Asia, at the expense of the west. The West Coast ports, despite severe labor and congestion problems they experienced last year, say they aren’t worried.

The Panama Canal Authority anticipates increases in cargo volumes transiting the canal once the expansion is complete, which will presumably shatter the record set last year. The canal handled 340.8 million tons of cargo in 2015, a 4.3 percent increase over 2014. The previous record was set in 2012 when the canal experienced 333.7 million tons. Container ships registered the most total tonnage in 2015, followed by dry bulk, liquid bulk, and car carriers.

“We are very close,” said Jose Quijano, CEO of the Panama Canal Authority, of the expansion’s progress. “An expansion of the Panama Canal has never been done and we feel very good about where we are.”

At a recent forum convened in Panama City, canal deputy administrator Manuel Benitez noted one goal of the expanded canal is to “transform Panama into a world-class logistics hub.”

Part of that effort involves developing and operating the Corozal Port, on the Pacific side of the canal. The Panama Canal Authority recently issued a request for qualifications for companies interested in competing to design, construct, and operate the Corozal Container Terminal. Thirteen of the world’s largest port operators responded. The authority is also studying the possibility of developing a logistics park with a roll-on/roll-off terminal, a liquefied natural gas bunkering facility, and top-off operations for dry-bulk carriers.

The Corozal Container Terminal is intended to be a common-user container transshipment terminal which will distribute cargo to the region, including the west coast of South America, Central America, and the Caribbean. It will provide services to reposition empty containers and handle local cargo, and is the first of several planned projects to enhance the country’s logistics capacity.

“What we’ve seen confirms the need for greater port capacity on its Pacific side,” said Panama Canal Administrator Jorge L. Quijano. “We’re eager to advance the development of the port and will ensure the concession is delivered through a transparent and participatory bidding process to bring the best performance possible to the canal.”

Among the project’s requirements is the need to develop a green terminal to limit impact on the environment. The planned terminal would feature anti-noise perimeter walls and electrical devices producing zero carbon emissions, along with a number of other elements recommended by a recent environmental impact study.

The final decision to develop the container terminal was made based on more than two years of studies and simulations to ensure the project’s financial and operational viability. Simulations conducted under the supervision of independent national, foreign, and Panama Canal pilots confirmed that the terminal site will be suitable for the safe maneuvering of neo-panamax vessels. Following a pre-qualification stage, the canal authority will release a request for proposals and tender for prospective companies.

PortMiami recently completed a 52-foot dredge project, and on-dock rail, touting itself as the only major logistics hub south of Virginia capable of handling fully laden post-panamax vessels. The port also acquired super post-panamax gantry cranes that can service cargo vessels up to 22 containers wide and up to nine containers above deck and eleven containers below.

“A new big ship era is here and PortMiami is ready,” said PortMiami CEO Juan Kuryla. “PortMiami is now able to berth post-panamax ships. The completion of our deep dredge and intermodal on-dock rail projects position PortMiami as the most convenient and efficient global hub on the North American East Coast ready to service the world’s leading ocean carriers.”

The Port of Charleston is also making a bid for Panama Canal cargo with a project to deepen its harbor to 52 feet and entrance channel to 54 feet, with construction expected to begin late next year. “When completed, Charleston will offer the deepest harbor on the U.S. East Coast,” said Jim Newsome, CEO of the South Carolina Ports Authority. “Currently we receive 11 post-panamax vessel calls weekly.” Newsome expects significant Panama Canal traffic increases beginning in 2017.

But Port of Long Beach CEO Jon Slangerup doesn’t anticipate that the expanded canal will lead to the diversion of significant volumes of cargo away from West Coast and to East Coast ports. “The cost of diverting transpacific container volume to the East Coast through the Panama Canal, adds to transportation costs and increases transit time by 20 to 40 percent,” he said.

Shippers that diverted cargo during West Coast labor action last year “returned to Long Beach as soon as they felt confident that operations were back to normal,” he added. “So long as we protect and enhance our value proposition, we have little to fear from other ports or the Panama Canal stealing our cargo. Not to mention that over half of the container vessels currently on order will be too big to fit through the expanded Panama Canal.”

The Panama Canal Authority, meanwhile, continues to prepare for the opening of the expanded waterway with training of the canal’s pilots and tugboat captains, with simulations, mock transits, and trial transits of neo-panamax vessels chartered by the authority. In April, the canal authority will conduct transit trial tests with a chartered vessel in the Atlantic locks. A date for the expansion’s inauguration will then be selected, expected to be in the second quarter of 2016, followed soon thereafter by the commercial opening date.

“We look forward to the opening of the expanded canal, providing safe, reliable, and efficient service to our customers for the next century and beyond,” said Quijano. “We are all excited about the road that lies ahead.”