Balancing volumes

22 Aug 2017
Mixed view: volumes at Balboa (pictured) are static, while Cristobal has seen

Mixed view: volumes at Balboa (pictured) are static, while Cristobal has seen "exceptionally strong volumes"

Panama Ports Co is adapting to changes in the region, explains Felicity Landon

Panama is the "epicentre for logistics in the Americas", according to Paul Wallace, chief executive of the Panama Ports Company (PPC). He's confident that this will remain the case although, as with so many ports in the region, Hutchison’s PPC is adapting to changing dynamics.

PPC operates Balboa on the Pacific and Cristobal on the Atlantic, some 85 miles apart; both saw lower volumes last year – a total of 3.6m teu compared with 3.8m in 2015 – mainly because of the global recession. This year, however, business has rebounded.

What can’t be ignored, says Mr Wallace, is the huge impact of the expanded Panama Canal, now being transited by vessels of around 10,000 teu and potentially up to 13,500 teu. As 20,000 teu vessels have entered service particularly on Asia-Europe routes, there has been a cascading of larger ships on to transpacific routes.

“In the past, vessels coming from Asia production hubs to the US going through the Panama Canal were a maximum of 3,500 teu. Now, 10,000 teu vessels are connecting directly with US consumers, going closer to the areas of consumption.

“Where previously transhipment was done in Panama because the larger vessels could not go through, now we see a trend of bigger vessels carrying more cargo straight through the canal to the Atlantic section – essentially, a migration of transhipment.”

Historically, 90% of Balboa’s throughput has been transhipment – but clearly it isn’t losing all of that. And, indeed, that isn’t the whole story, thanks to a dramatic increase in West Coast South American reefer exports.

Balboa is handling growing volumes of Central and South American exports being feedered into the port to connect with mother vessels heading to the US and Europe.

“Yes, we did see a downturn of volumes from Asia, but the growth of volumes from Central/South America, going up the east coast of the US and to Europe, is balancing this out,” says Mr Wallace. “Volumes that used to go through US West Coast ports into the hinterland are now going through the canal. As a result, our volumes at Balboa are perhaps down by about 1% overall. In essence, they are pretty static at 3m teu.”

The main callers at Balboa are MSC/Maersk (2M) and THE alliance, the latter bringing an additional 2,000 teu a week into the port since signing earlier this year.

At the Atlantic end of the canal, Cristobal is seeing exceptionally strong volumes and has had some record months this year.

“We are definitely seeing big growth in the Atlantic sector generally – once vessels go through the canal, there are a lot of logistics opportunities,” says Mr Wallace.

Cristobal also benefited from volumes diverted from Kingston after hurricane damage there last year.

Making investments

PPC has invested more than $1.5bn in its two ports over the past 20 years. “We invested early, foreseeing the fact that vessels would upsize due to the canal expansion,” says Mr Wallace. “Balboa can already handle 20,000 teu vessels, so we are leading the market and driving efficiency. As well as quayside investment, we have upgraded our container yards to create more capacity and improve efficiency and environmental performance. That has included the electrification of our yard and quay cranes.”

Alongside containers, PPC’s ports have seen a growth in breakbulk, general cargo, ro-ro and cruise volumes, he says. It is also championing greater use of rail links to help reduce road congestion and improve safety.

Last year, PPC participated in an exhibition in Orlando for retail companies. As a result, says Mr Wallace, major companies are putting their toes in the water and considering Panama for inventory and possible air/sea solutions.

“Certainly, we are a window to global trade in terms of convergence. Now, rather than adding new port capacity, Panama needs to add value in the form of logistics and semi-manufacturing.”

He is concerned about the Panama government’s apparent conviction that increasing port capacity will mean increased revenue for the country. “It doesn’t go that way. Ports don’t create international trade – we are just the facilitators in the middle. What we do need is to ensure that we have the depth of water, large cranes and the ability to flex labour resources to ensure we are handling ships greater than 10,000 teu as efficiently as possible.

“Of course, more competition will drive efficiency; we just don’t want to be in a position where the government injects far too much capacity which then creates job insecurity within the total port sector.”