The Panama Canal Expansion is Changing the Ports Industry in America

You probably know that Panama is expanding and widening its Canal in order to allow transit of the Super Post Panamax ship behemoths – and to increase revenues as well… What you may not know is how the Canal project is turning the US port – and related logistics industries – upside down. The ramifications range from regional and international investment to economic and job creation to reforming the whole political system that regulates the ports.

The Panama Canal Authority (ACP) recently released an update saying that the $5.25-billion project to expand the Panama Canal and build a third set of locks is 46.5% completed. In its report the ACP estimated that before the end of his year $4.28 billion dollars will have been invested in Canal-related contracts. The expansion is now expected to be finished in early 2015.

To set the picture of what this means, consider that currently nearly 5% of the world’s shipping trade goes through the Panama Canal, with the biggest users being China and the US. This year world shipping numbers are down but the Canal set a new record for tonnage passing through for the first six months of this year. Once the Canal widening and new locks construction are completed, the potential impact is important to say the least.

The US coastal ports see the possibility of getting their share of the increased traffic to load and unload with them. But most are not capable of physically handling the Super Post Panamax ships – and therefore getting a piece of the money-making opportunity.

To get ready, the ports are trying to find money and get US federal permissions for channel dredging, wharf and warehouse construction, overland transport connections and every other type of related infrastructure you can imagine. We are talking about ports in New York, New Jersey, Baltimore, Jacksonville, Savannah, Charleston, Miami, Houston, Los Angeles, Norfolk and New Orleans to name a few. The investment numbers are in the multi billions.

In his 2010 State of the Union address, President Obama assured that doubling the nation’s exports by 2015 was a top priority. He said that port expansions can improve economic growth and employment numbers. Port authorities and local politicians are guaranteeing that this is not possible without Super Post-Panamax capability.

Maybe the situation is best described by Kurt Nagle, the American Association of Port Authorities (AAPA) President and CEO. “Despite substantial investments by port authorities and private-sector business partners, inadequate infrastructure connecting ports to landside transportation networks and water-side shipping lanes often creates bottlenecks that result in congestion, productivity losses, and a global economic disadvantage for America. These congestion issues and productivity losses have the potential to stymie our ability to compete internationally.”

Despite Obama’s words, making them come true is not easy for regional ports. The challenges come back to red tape. What is the problem? Port-deepening projects generally are proposed by states, but approval has to come from higher up to get a go ahead. Getting that approval requires approval from the Secretaries of Commerce and the Interior, the US Army Corps of Engineers – who to the agency’s credit, is now implementing new procedures to make approval quicker and more efficient – and the administrator of the Environmental Protection Agency. These feasibility studies usually require 10 to 15 years to complete and cost multi millions of dollars. Even with the go ahead, there is no guarantee that Congress will approve funding, especially from the new administration situation in the States.

The port States are doing their best to navigate the federal roadblocks. They are looking for methods to use their budgets to aid port expansion. Some have even gone into partnerships with private funding sources (including Asian funders during the current US hostility to outsourcing) to prove to the federal government that it doesn’t have to pay to enable economic and job growth opportunity.

On the positive side of this issue, John Carver, head of Jones Lang LaSalle’s Ports Airports and Global Infrastructure (PAGI) group says that “Developers, investment interests, and supply chain executives remain optimistic about our nation’s seaports.”
The Panama Canal – more than just a ‘Big Ditch’.