February 7, 2012

Panama Canal chief says expansion shouldn't harm West Coast ports

In MODEX keynote address, Aleman Zubieta says Canal is not in competition with West Coast Ports.

By DC Velocity Staff

The CEO of the Panama Canal Authority said today that he doesn't expect the expanded canal to lead to a diversion of Asian-originating cargo from West Coast to East Coast ports, contending that global trade will grow sufficiently in coming years to expand the import pie for both West Coast ports and the expanded canal.

Keynoting the second day of MODEX 2012 in Atlanta, Alberto Alemán Zubieta said the canal is "not in competition" with West Coast ports. Instead, he said, "we will open up alternatives that were not there before."

Alemán Zubieta oversees the seven-year, $5.25 billion project that will add a third set of locks on the canal's Atlantic and Pacific sides, and deepen its waters. When completed by the summer of 2014, the canal expansion project is expected to triple the container-carrying capacity of the vessels transiting the isthmus to 12,600 twenty-foot equivalent units (TEUs) from 4,400 TEUs. The canal is projected to handle 8.4 million TEUs a year by 2015, according to the authority.

The expansion is expected to double the canal's total tonnage capacity to 700,000 tons from the current 350,000 tons. In 2011, the canal handled a record 322.4 million tons.

Some experts have predicted that the West Coast ports, notably the giant ports of Los Angeles and Long Beach, will lose market share to East Coast ports as more companies choose to move their Asian seagoing imports bound for the East Coast and Midwest on an all-water route rather than a more expensive option of offloading the cargo on the West Coast and trans-shipping inland by rail or truck.

Others, however, believe that any modal cost savings will be more than offset by the longer voyage times involved in an all-water sailing to the East Coast.

Alemán Zubieta said the price of a sea-rail move off the West Coast can't match the low rates of an all-water route. "The railroads will not price their cargo low enough to compete with the canal," he said.

Ultimately, the decision will come down to whether a shipment's value is high enough to tolerate the longer transit and delivery times inherent in an all-water route, according to Alemán Zubieta.

Alemán Zubieta said Panama is positioning the canal as one of the world's great trans-shipment centers linking all points in North, Central, and South America. It will be common, for example, for cargo originating in Peru or Venezuela to be fed into the canal for loading on a vessel that has stopped to offload at the isthmus before heading to the U.S. East Coast, he said.

As the only nation with terminals on two oceans, Panama will become a "platform to connect all of the Americas," Alemán Zubieta said.

The canal's expansion has triggered a race among the major East Coast ports to deepen their harbors to accommodate the megaships expected to transit its locks. The Southeast U.S. ports of Charleston, S.C., and Savannah, Ga., are in a no-holds-barred battle to be positioned as the first port of call in the region.

It is widely believed that ships will choose one or the other, but not both. However, Alemán Zubieta believes both ports are needed to handle post-expansion traffic. Charleston and Savannah, he said, offer "complementary" strengths.

More coverage from MODEX 2012