October 4, 2010

Panama aims to become a crossroads of global trade

The Panama Canal expansion will make Panama the hub of cargo movements in the Western Hemisphere, canal official predicts.

By Toby Gooley

The long-awaited Panama Canal expansion, slated for completion in 2014, will be a "game changer" that will make Panama "the most important cargo hub in the Americas," declared Rodolfo Sabonge, the Panama Canal Authority's vice president of market research and analysis, in his keynote speech at CSCMP's 2010 Annual Global Conference in San Diego.

Sabonge said the new, larger locks now under construction, which are designed to accommodate much bigger ships than the current infrastructure can handle, will fundamentally change the way carriers deploy their vessels. He predicted that some would adopt a "reverse intermodal" approach, skipping calls on the U.S. West Coast and funneling containers destined for other U.S. markets through trans-shipment hubs in Panama. That route will be cheaper than intermodal moves via West Coast ports, particularly for 53-foot containers, he asserted. Furthermore, carriers will see financial benefit in picking up backhauls from the U.S. East and Gulf Coasts and Central and South America, and feeding them into east-west routes served by the new class of giant post-Panamax vessels, he added.

Containerized shipping is not the only industry segment that will benefit from an expanded Panama Canal. Large bulk and liquid carriers that currently are too large to transit the canal will have an entirely new route open to them, Sabonge said. For example, liquid natural gas (LNG) tankers will for the first time be able to use the canal. As a result, transportation and logistics costs for some commodities will drop sharply, and new markets and trade lanes will open up. In particular, this development will facilitate new trade flows between South America, Europe, and China, he said.

Changing trade and cost patterns as well as strong economic growth in South American markets will attract more manufacturing, assembly, and logistics operations to Panama, Sabonge predicted. To accommodate that anticipated growth, Panama is expanding the already city-sized Colón Free Zone near the canal's Atlantic entry point. According to the Free Zone's website, there are now 10 warehouse projects under way or planned for the near future. At the other end of the canal, the Panamá Pacífico industrial development is opening new office, warehousing, and manufacturing properties for international companies at a rapid clip. To help meet expected demand for a trained workforce, the Massachusetts Institute of Technology (MIT) and its Colombian affiliate, the Center for Latin American Logistics Innovation, will soon open a logistics and transportation education center in Panama.