Economic Development / Ocean

Expanded Panama Canal Puts Northeast Ports in Line for New Business

April 1, 2012
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The expansion of the Panama Canal is forcing U.S. ports to re-examine their operations to ensure they can seamlessly handle post-Panamax ships. The expanded set of Panama Canal locks is expected to be operational by the end of 2014, and ports in the Northeast U.S. have an eye toward increasing the amount of business they conduct.

The expanded canal will create additional options for carriers. “[The expansion] will create more competition and, ultimately, lower costs of goods, both imported and exported,” says Kurt Nagle, president and CEO at the American Association of Port Authorities.

Ports in the Northeast U.S. are gearing up for the expansion by making significant infrastructure upgrades, both on- and off-dock. Their strategy is simple: convince companies that by taking an all-water route from Asia to the Northeast through the Panama Canal with a short truck haul to the final destination—as opposed unloading cargo at a West Coast port and rail or truck that cargo inland, especially to the Midwest and East Coast—they can save thousands of dollars in costs per container.

“We’re pretty confident that looking at the price difference, it will be a huge bottom-line advantage for us,” says Richard Scher, communications director at the Maryland Port Administration (MPA), operator of the Port of Baltimore. “It will be a lot less expensive in the end for companies that bring cargo from Asia.”

 

‘A game-changer’

The Port of Baltimore sits in the middle of the third-largest consumer market in the country, stretching from Delaware to Northern Virginia. It is ranked No.1 among U.S. ports for several types of cargo, including automobiles, roll-on/roll-off containers, and imports of forest products, sugar, and gypsum.

The port believes it has the necessary pieces that will make it an attractive port of call to the largest ships in the world. “We think the Panama Canal expansion will be a game-changer for us,” Scher stresses.

Recently, Hapag-Lloyd announced it will begin weekly calls at the Port of Baltimore, meaning three of the top five container shipping companies in the world will regularly do business with the port—Mediterranean Shipping Co. (MSC) and Evergreen Marine Corp. being the other two. “That bodes well for us,” Scher says.

The Hapag-Lloyd agreement was the result of collaboration between MPA, CSX Corp., and Ports America Chesapeake. In 2009, MPA and Ports America Chesapeake signed a 50-year agreement that allows MPA to lease its 200-acre Seagirt Marine Terminal to Ports America.

The partnership is paying dividends in other ways, as well. Ports America is building a 50-foot container berth at Seagirt and four Super Post-Panamax cranes. The $105 million project, on target to open later this year (two years ahead of schedule), will sit on a 50-foot channel in place at Seagirt for about 20 years.

“[The container berth] is the other piece of the puzzle that you need to accommodate the super-sized ships,” Scher points out. “We believe our container business will benefit from the new berth. We have a lot of capacity at Seagirt, and we have room to grow.”

When the Seagirt container port is complete, the Port of Baltimore will be one of only two East Coast ports to have a 50-foot channel and berth.

Logistically, the Port of Baltimore sits off of Interstate 95, the main highway of the East Coast. Nearby Interstate 70 gives companies access to Pennsylvania, Ohio, and the Midwest.

Two Class I railroads, CSX and Norfolk Southern Corp., are on dock at the port. The port will be a terminus for CSX’s National Gateway, which will increase the use of double-stack trains between mid-Atlantic ports and the Midwest.

As part of the initiative, CSX will construct an intermodal container transfer facility near the port. The facility will be built south of a 100-year-old rail tunnel that can only accommodate single-stack trains. This will allow for single-stack trains to marry up with the new facility and turn their loads into double-stacks.

 

Prepared to accept the largest ships

While Baltimore builds its container terminal, the Port of Virginia in Norfolk is the only East Coast port that currently operates a 50-foot channel and berth, meaning it is a near-certainty that the class of larger ships that will come through the expanded Panama Canal will stop there.

“If the expanded canal opened tomorrow and an 11,000-TEU (twenty-foot equivalent unit) ship came through fully laden, it could come to Virginia,” says Joe Harris, spokesman at the Port of Virginia. “Last summer, we had a 9,600-TEU vessel come into our harbor without a hitch.”

While many ports on all coasts of the U.S. struggle to get federal dollars for dredging and other projects (the result of the federal budget deficit), the Port of Virginia made its investment in the early 2000s and completed dredging in 2006. “We’re not in D.C. seeking federal money,” Harris stresses. “That gives manufacturers the confidence that our port is ready. The stability adds to a company’s decision-making process.”

The Port of Virginia has one of the most modern infrastructures anywhere in the nation, upgrading all terminals during the past decade. APM Terminal, built in 2007, is the most technologically advanced container terminal in the Western Hemisphere, Harris says.

Logistically, the port has two Class I railroads, Norfolk Southern and CSX, on dock. There is a barge connection to transport heavy cargo via a water route to Richmond. By highway, the Port of Virginia is within a day’s drive of two-thirds of the nation’s population.

The Port of Virginia is the eastern terminus for Norfolk Southern’s Heartland Corridor, a direct double-stack train rail link to Chicago and the Midwest. The Heartland Corridor reduces transit time between Norfolk and Chicago from four to three days and is nearly 250 miles shorter than previous circuitous routings.

So, the pieces are in place for the Port of Virginia to increase its business.

MSC announced in January that it will readjust the rotation of its Golden Gate Service (Asia to the U.S. East Coast via the Suez Canal) to make a double call on the Port of Virginia. Inbound, the service will stop at Virginia and other ports on the East Coast and Caribbean; outbound, Virginia will be the last stop before heading to Asia.

“Shippers can run their biggest ships through [the Port of Virginia], load them heavy with exports, and sail from here,” Harris says. “They will maximize the value of their big ships if they load them in Virginia.”

That can be the same strategy when the post-Panamax ships start traversing the expanded Panama Canal in several years, Harris says.

 

Using transshipment ports to increase business

Many ports in the Northeast will see increased business once the Panama Canal expansion is complete, even if that business doesn’t come from the largest ships.

The Port of Boston, the only container port in New England, currently has service via the Panama Canal with CKYH Consortium and via the Mediterranean and Northern Europe with MSC.

“We expect to see larger vessels that are currently going through the Panama Canal and serve as feeder vessels, whether from Caribbean transshipment ports or larger East Coast ports,” says Michael Leone, port director at the Massachusetts Port Authority, operator of the Port of Boston.

Transshipment ports will grow in importance once the canal expansion is complete, says Robert West, principal strategist, ports and marine terminals at WorleyParsons Group. A transshipment of cargo from a post-Panamax ship to a smaller vessel (such as a Panamax) is a necessity if ports cannot accommodate the larger ships, he stresses.

Major transshipment ports in the Caribbean are prepared for an increase in business, including Freeport (Bahamas), Kingston (Jamaica), Caucedo (Dominican Republic), Manzanillo International Terminal (Panama), and Cartagena (Colombia).

“The added charges for transshipments are more than offset by the reduced cost of using the larger ships,” West points out. “Geographically speaking, transshipping allows the opportunity to load eastbound ships with multiple-market cargo.”

Transshipment ports can allow the Port of Boston to conduct business with new regions such as Australia, South America, and Western Africa. “We’re hopeful that those markets will open up to us with the Panama Canal expansion and Caribbean transshipment ports,” Leone points out.

The port has invested about $70 million to upgrade its infrastructure, including additional dockside cranes and new yard equipment. It acquired adjacent land for future expansions. Also under development is a road connector to keep trucks from having to use city streets.

The port is also working with the U.S. Army Corps of Engineers on a feasibility study to deepen the harbor channel.

 

Removing an impediment

The major obstacle to post-Panamax ships accessing three marine terminals in the New York City metropolitan area is the 81-year-old Bayonne Bridge that connects Bayonne, N.J., and Staten Island, N.Y. Its current 151-foot air draft restriction impedes larger ships’ ability to do business with marine terminals west of the bridge—Port Newark and the Elizabeth Port Authority Marine Terminals in New Jersey and Howland Hook on Staten Island.

That obstacle is expected to be removed by 2016 when work is completed on raising the span of the bridge by 65 feet to accommodate the larger ships in a $1 billion project. It is just one project that the Port Authority of New York & New Jersey is undertaking to provide unimpeded ocean and landside access capacity to attract post-Panamax ships. Other projects include:

·         A 50-foot harbor deepening initiative to the terminals at Port Newark, Port Elizabeth, and Port Jersey by the end of this year and to New York Container Terminal by 2014.

·         A $39 million investment to upgrade roads leading to and from Port Newark.

·         Road-widening projects in the Port Newark/Elizabeth-Port Authority Marine Terminal.

Recent Articles by Ken Krizner

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