Bigger is better
As the Panama Canal expansion nears completion, Carly Fields asks how important ports have been in the process
While the $5.25bn expansion project has been a long-time coming, the end is now in sight and should co-incide with the Canal’s centenary celebrations.
The only potential hitch in the plan is a wetter-than-normal rainy season that has held up concrete pouring. But Rodolfo Sabonge, Panama Canal vice-president, Market Research & Analysis, remains confident that the administration will meet its 2014 deadline.
Speaking with Port Strategy, he says: “The final completion date may be a little delayed to the end of 2014, but we can see the expansion will be completed within the schedule that we had. This is a major programme which requires major logistics.” Major it certainly is: you can lay the Empire State Building down in the bottom of every new chamber and it is 11-storeys from the bottom to the top of those same chambers.
And in a truly global project, much of the expansion work has been predicated on knowledge-sharing alliances and partnerships with ports around the world. Mr Sabonge explains: “The expansion of the canal requires the ports to receive the ships. When we began this process almost eight years ago, we found that most of the cargo coming from Asia through the Canal was going down the US East Coast. We started communications with these ports to share information and share some insights of their future plans.”
This early ‘communication’ started a chain of Memorandum of Understanding signings with ports.
“The main thrust of the MOUs was the big ports, and later other ports approached us as a second tier. We were able to see that it was not necessarily only the big ports that had the potential to grow. Then we started receiving enquiries for companies that were not even ports but had an interest in the Panama Canal, such as the soybean association.”
Some alliance partners brought experience of dealing with shippers in the US, which gave the administration a foothold in retailer organisations. “We have learned a lot from these alliances, making Panama a logistics centre. We are now showcasing Panama as a place to distribute cargo to Latin America,” says Mr Sabonge.
Alliances with European ports brought contacts for short sea shipping, a concept that the administration is keen to explore. The Authority also signed an MoU with Antwerp, allowing them to learn and train from the masters in lock construction.
Consequently, officials at the Panama Canal feel that it is now more than just a place to transit; today it is a “transportation network”, says Mr Sabonge.
Panama Canal chief executive Alberto Alemán Zubieta agrees. “This is about more than expanding the Panama Canal; it’s also about adding value. You should look at the Panama Canal as a value add proposition. The opportunities for logistics are tremendous.”
Maximising the logistics potential is one element of the expansion; bringing a balance to trade flows is another.
“If you look at world trade today, post-panamax ships can move everywhere apart from through the Panama Canal,” points out Mr Sabonge. “So we are improving to make a more balanced use. We are in no position to say which [ports] will be winners, but facilitating the movement of post-panamax ships will improve the economies of scale. So if a port is not ready to receive these ships, the shipper will use a hub to tranship.
“However, we did not expand to allow large ships; we were running out of capacity. Looking at the demand curve we were going to reach capacity by 2011, but the recession gave us some breathing space. Running out of capacity does not mean the ships won’t transit, it means they will have to wait longer. If there is no expansion, we cannot grow our profits. “
But the million dollar question is what the cost of the expansion will be to the end user. Everyone involved is careful not to commit to a revised fee structure post expansion, or even speculate on percentage increases in transit costs. Instead, the response looks to the benefits, rather than costs per se. “No one using the Canal is paying for the expansion,” said Mr Alemán. “When the industry uses the canal they are using a service and paying for that service.”
