“When it gets good again, it's really going to get good."
The United States Gulf Coast has started gearing up for the Panama Canal expansion project slated to complete in 2014. Proposed port expansion projects in the Gulf of Mexico total over $1 billion, media reports say. The Gulf ports hope that they will get a much larger share of the boxship pie as the US economy recovers and larger container ships call ports in the East Coast directly from Asia instead of transiting containers via West Coast ports.
About five percent of global cargo passes through the Panama Canal today. The $5.25 billion Panama Canal expansion project will allow the largest container ships to cut through to the eastern side of North America. Analysts say this may be a game changer; US West Coast ports will no longer enjoy a monopoly on big boxship calls.
Called ‘The Third Set of Locks Project’, the expansion of the Panama Canal will double the canal's capacity and allow more traffic. Two lock complexes, one each on the Atlantic and Pacific sides, will be constructed. New access channels, dredging and widening of existing channels will create a new lane of traffic along the Canal. The new locks will be 426.72 m long, 54.86 m wide and 18.29 m deep. They will connect to the existing channel system through new navigational channels and use rolling gates instead of the miter gates now in use. They will also use tugboats instead of locomotives to position vessels. The canal is limited at present to container vessels with about 5,000 TEUs capacity; post 2014, the Panama Canal will be able to accommodate behemoths that can carry more than 14,000 TEUs.
Although some US Gulf Port officials admit that pumping in money into port development is risky, they say that delaying investment in expansion could cost some US ports dearly. "There are some ports throughout North America that have said, 'Let's wait and see how long term this economic environment is going to last,'" says 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."
Many are not willing to wait. The Port of New Orleans plans to pump in $237 million for expansion of its container terminal. Mobile will spend $75 million on a new facility and a turning basin to manoeuvre bigger ships; the port believes that the Gulf Coast will eventually become a better alternative to the West Coast, 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,” says Head Jimmy Lyons.
Gulfport is spending $570 million in federal funds to elevate the port to 25 feet above sea level. Tampa is expanding berths and stacking areas, buying two cranes at a cost of $17 million. Tampa's new container terminal 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 CEO.
Some experts are uncomfortable with the money being spent on expansion of the Gulf ports. Economist Marc Levinson says that there are many post recession factors that could affect shipping negatively. Some of these are known: congestion in the US freight system, new environmental laws and the fact that post recession economics is still murky. In addition, some point out, Gulf ports do not have deep channels, and transfer of containers into smaller ships will cost money. However, many ports believe that the time to expand is now. As Gary LaGrance, executive director of the Port of New Orleans says, “When it gets good again, it's really going to get good.