Panama Canal expansion plan has Gulf ports racing for potential new business

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Dec 2009

With the recession showing signs of ebbing, Gulf of Mexico ports hope hundreds of millions of dollars in expansion projects proposed before the downturn will help them capture more trade as the world economy recovers. A $5.25 billion project to expand the Panama Canal will allow the largest container ships to cut through to the eastern side of North America — and perhaps cut into the dominance of West Coast ports handling freight from Asia.
Even though the downturn has clouded future trade patterns, port officials said now is the time to be getting ready. Expansions pegged to the Panama Canal project, which is due for completion in 2014, had largely been on the drawing board before the recession began.
"There are some ports throughout North America and that have said, 'Let's wait and see how long-term this economic environment is going to last,'" said Don Allee, chief executive of the Mississippi State Port Authority at Gulfport. "But if a port decides to wait, it could be a costly decision."
The Panama Canal project, approved by Panamanian voters in a 2006 referendum, involves construction of two larger locks expected to double the 50-mile canal's capacity within 20 years. The project includes $2.3 billion in institutional financing.
The waterway now moves about 5 percent of the world's cargo.
The largest container vessel that can now use the canal has a capacity of about 5,000 TEUs — or 20-foot-equivalent units, generally the standard container size that can be transferred easily from ship to rail or truck. The expanded canal will be able to handle giant ships that can carry more than 14,000 TEUs.
Since the 1950s, containers — basically enclosed trailers without wheels — have moved to dominate the shipping industry. Containers can be quickly transferred to rail cars or put on flatbed trucks.
The largest Gulf Coast container port is the Port of Houston, which, according to the American Association of Port Authorities, handled nearly 1.8 million TEUs in 2008. New Orleans was a distant second with 235,324, followed by Gulfport with 214,074.
Los Angeles handled 7.8 million TEUs last year, while Long Beach took in nearly another 6.4 million, much of both totals coming from Asia. Long Beach has run out of room for expansion and is concentrating on improving efficiency. During booming times, both ports have congestion problems with ships waiting at anchor for days before being unloaded.
Jimmy Lyons, head of the Alabama State Port Authority, which operates the Mobile port, believes the Gulf Coast will eventually be a lower-cost alternative to the West, despite the additional 4,500 miles ships from Asia have to travel to reach the Gulf of Mexico.
"Instead of bringing a container into Long Beach, and dragging it by rail all the way to Memphis, they'll be able to bring it into Mobile, then send it to Memphis," Lyons said.
Gulf Coast port expansion projects being developed and proposed total over $1 billion.
The Port of New Orleans is looking for private investors for a $237 million expansion of its container terminal. Tampa, which opened its container terminal a couple of years ago, is expanding berths and storage space and adding two cranes at a cost of $17 million. Mobile, which opened its second container terminal last year at a cost of $300 million, is working on a $75 million facility to transfer container cargo to five railroad outlets and a turning basin to handle larger ships. Gulfport is in line for $570 million in federal funds to elevate the port to 25 feet above sea level.
Tampa's new container terminal, which handled about 44,000 TEUs last year, hopes to attract freight that would otherwise have to be brought by rail from West Coast ports to Atlanta or St. Louis and put on trucks before coming to Florida, said Richard Wainio, the port's chief executive.
But a trade expert warns that predictions of more trade coming into Gulf Coast ports may come up short. Marc Levinson, an economist and author of "The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger," said there are numerous post-recession unknowns that could affect shipping.
For example, there is congestion in the U.S. freight system.
"Shippers are just not as confident that cargoes are going to arrive on time like they used to," he said. "That's one factor that's going to reduce the growth in international trade."
And the federal government is imposing new environmental standards — such as limits on diesel emissions — on U.S. ports.
Levinson said that after the recession ends, foreign companies could decide it's cheaper to build plants in the United States — rather than pay expected higher shipping costs with less delivery reliability.
Since the Gulf ports don't have channels deep enough to handle the largest container vessels, almost all plans call for the initial transfer of cargo into smaller ships. Such facilities already exist in the Caribbean. But the state of Louisiana is trying to attract enough private investors to build a $1 billion-plus transfer point off the mouth of the Mississippi River in the Gulf.
The project's legislative sponsor, state Sen. A.G. Crowe, said the largest ships would be able to transfer cargo to smaller ships for calls all along the Gulf Coast and up the Mississippi River.
Although port officials agree that the competition won't be a winner-take-all affair and likely result in more deliveries to regional markets from ships that call at several ports, the competition is steep.
"Could there be a case for overbuild of infrastructure? Absolutely," said Gary LaGrance, executive director of the Port of New Orleans. "When is the time to build? Absolutely now, even with a global downturn in the economy. When it gets good again, it's really going to get good."

Source: Associated Press