Growth models

APMT is investing in modern infrastructure in new ports, including at Callao APMT is investing in modern infrastructure in new ports, including at Callao

The Caribbean could be overall winner in the Canal-expansion transhipment battle, writes Dave MacIntyre

The widening of the Panama Canal in 2014 - or later if delays take their toll - not only increases ship capacity moving from the Pacific to the Atlantic, it throws up an interesting challenge for terminal operators. Do they mould their investment plans for direct calls for larger ships, or upscale their transhipment capacity to make them attractive as hubs?

The new expanded locks will offer lines the ability to deploy larger tonnage, with capacities up to 15,000 teu to the US East Coast, Gulf Coast, the Caribbean, to the West Coast of South America, and from Asia and Europe.

Ports in Panama, Jamaica, Colombia and other Caribbean countries are jostling for position as the terminal operators decide on their strategies.

Neil Davidson, senior advisor – Ports at respected maritime consultancy Drewry, says that the US east coast will be served by a mixture of direct calls and by transhipment.

“For the transhipment, the key point is that the hubs would not be US ports, as transhipping at US ports is too expensive, plus the Jones Act restrictions make feedering with US flag vessels too expensive. So … the hubs serving the US will be Caribbean ones - i.e. lower cost, and no Jones Act issues (apart from Puerto Rico),” he tells Port Strategy.

 

Growth strategies

Mr Davidson says the natural flow-on effect for terminals from the canal widening will be greater opportunities for transhipment activity by Caribbean hubs.

“Major terminal operators are planning for Caribbean growth, albeit most prefer to invest in gateway terminals rather than transhipment because gateways tend to be more profitable and lower risk.

“Terminal Link which is investing in Kingston, [is] an arm of CMA CGM. PSA has also been linked to a new development in Cuba. Having said this, a number of the major GTOs/ITOs already have a presence in the Caribbean transhipment scene e.g. SSA and HPH in Panama, HPH in Freeport and DPW in Caucedo.”

SSA Marine’s investment in Panama, through its subsidiary Manzanillo International Terminal, has committed to heavy investment in Colon, including dredging, cranes and the capability of handling post-panamax ships. It has seen teu throughput rise from 72,000 in 1995 to around the two million mark.

Another major player in the area is APM Terminals. Joe Nielsen, managing director of Latin America terminals for APMT, based in Panama, says the company expects to see significant change for the port and shipping industries as a result of the widening of the canal.

“New, larger vessel strings could lead to increased use of Caribbean ports as transhipment hubs, but also to increases in the routing of cargo through key ports in the US that have the ability to handle next-generation vessels.

“We do not believe there is sufficient justification at this stage to invest in additional transhipment facilities in the Caribbean. There are already several choices in this market for shipping lines, and adding terminal capacity does not offer an attractive proposition at this point.

“Our terminal project in Moin, Costa Rica, will offer the possibility for transhipment when it becomes operational in early 2016, but its main purpose is to provide modern capacity for cargo movement for the important Costa Rican domestic markets.”

 

Efficiency improvements

Mr Nielsen says APMT’s focus has been on investing in modern infrastructure in new ports throughout Latin America, and introducing more efficient operating practices to existing facilities. These include Muelle Norte Terminal at Callao, Peru and its terminal in Itajai, Brazil.

In total, APMT has committed $2.5bn toward upgrading port capabilities in Latin America.

“APM Terminals is quite ready to serve the new tonnage that will come with the widening of the Panama Canal. We will continue to invest in modern infrastructure facilitating trade in the high growth markets of Latin America, and our ongoing investment programme demonstrates the seriousness of this commitment.

“Consequently, in the next ten years, APM Terminals will have a much stronger presence in Latin America,” says Mr Nielsen.

From a carrier’s perspective, the Colombian port of Cartagena looms large in Hamburg Süd’s hub strategy.

Frank Smet, principal head of the Line Management department at Hamburg Süd, points to Cartagena as a successful model, connecting to seven of the line’s services between North and South America, the Caribbean, the Mediterranean and North Europe.

The group’s transhipment volume through the port has increased fivefold since 2006.

 

Cartagena calls

“Cartagena as a location has a lot of advantages that are indispensable for us," says Mr Smet. “The port offers connections to numerous important liner services – not only those of Hamburg Süd – and has state-of-the art technology in terms of hardware and operational procedures.”

He agrees there will be a growing demand for hub capacity in the Caribbean after the canal widening.

“Apart from a pure upsize of vessel systems there will also be a reconfiguration of services, in particular Asia-US East Coast via Suez. We expect most services will stop over at one or more Caribbean hubs to facilitate distribution within the basin and the Mexican/US Gulf.”

Hamburg Süd is therefore positioning for further growth in Caribbean transhipments.

“Cartagena has invested and expanded its capacity and continues to explore options to expand. Having said this, we also expect an increasing number of transhipments on the Pacific side once larger systems from the US East Coast and Europe cross the canal, for connection to SAWC, WCCA, NAWC and possible even to New Zealand and Australia.”

Looking ten years ahead, how does Hamburg Süd see its network of transhipment hubs developing?

“Not all ports will be able to accommodate ever-growing vessel sizes. In addition, economies of scale will continue to drive hub and spoke shipping networks,” says Mr Smet.

And while on the theme of looking ten years ahead, how does Drewry’s Neil Davidson see the network of terminal facilities in the region developing?

“Panama and Freeport will remain strong. Caucedo and Kingston are likely to increase their roles. I think that mainland ports on the north coast of South America will also emerge more strongly e.g. Cartagena. Cuba is also one to watch,” he says.

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