Bulk to gain from Panama Canal expansion
The Panama Canal expansion project will primary benefit the container industry, but the ability of larger vessels to transit the hemispheric shortcut also opens new markets and trade lanes for dry and liquid bulk carriers, Rodolfo Sabonge, vice president for market research and analysis at the Panama Canal Authority, said last Tuesday.
A new set of locks triple the size of the existing ones, and widened entranceways on the Atlantic and Pacific oceans will enable container vessels greater than 12,600 TEUs to transit the isthmus compared to a maximum current capacity of 4,400 TEUs.
The economies of scale provided by the larger vessels will make cargo rates more competitive relative to other modes and lanes, potentially opening trade flows that did not exist, Sabonge told more than 2,000 people gathered for the Council of Supply Chain Management Professionals conference in San Diego.
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| Sabonge |
The wider canal has the potential to increase trade in coal and iron ore from Colombia and Venezuela to China, he said. It will also make crude oil shipments from Ecuador and the U.S. Gulf Coast more competitive compared to oil sourced from Nigeria and other countries. Liquid bulk trade between Venezuela and China could develop, while oil and chemical trade between Asia and the U.S. Gulf and East coasts could increase, he added.
A canal able to handle 200,000 cubic meter tankers will be the first route of choice for liquefied natural gas trade between Trinidad and Chile, and between Peru and the U.S. Gulf Coast, should those develop, Sabonge said.
Ships larger than 100,000 deadweight tons will also provide an economical alternative to rail and West Coast ports for U.S. grain producers shipping to Asia, he said.
Dry bulk transits increased 11 percent to 2,687 and tanker transits rose 12.3 percent to 2,320 during the 2009 fiscal year, according to the PCA.
The canal modernization will also impact players in the container trade.
Many maritime industry observers expect the canal expansion to accelerate the shift of cargo from West Coast gateways to all-water routes calling on the U.S. Gulf and East coasts. Sabonge said a key driver behind the reverse intermodal trend is that the liner industry can internalize the transportation costs and make a larger profit rather than contracting with western railroads to complete a container move.
As for container vessels, the cost for a one-way slot will be $26 cheaper on an 8,000-TEU vessel and $48 less on a 10,000-TEU vessel, even with higher canal toll fees or transshipment charges factored in, Sabonge said. Others have said the difference in cost between all-water and transcontinental intermodal, by itself, isn't a significant determining factor in shipper routing decisions.
The canal expansion also makes it possible to expand the use of 53-foot containers beyond the West Coast for the first time, Sabonge said. APL is the only container line to offer 53-footers in Asia as a way to reduce time and costs to large shippers that transload much of their inland-bound cargo from 40-foot international boxes to 53-foot domestic containers and trailers common in the United States. The 53-foot ocean-capable containers can only fit on post-Panamax ships, which to date are relegated to the transpacific lane.
The canal expansion, along with related growth of Panama's ports and cluster of logistics service providers, will attract an increasing amount of transshipment traffic from container lines at the expense of Caribbean ports such as Kingston, Jamaica, and Freeport, Bahamas, according to a June report by graduate students Daniel Munoz and Liliana Rivera at MIT's Center for Transportation & Logistics.
Most components of the expansion project are ahead of schedule and work is to be completed by mid-2014, Sabonge said. Plans call for engineers to test the new locks for three to six months, beginning early in the year, before opening to commercial traffic, he elaborated after his presentation. ' Eric Kulisch