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U.S. Ports Should Ready for Panama Canal Expansion
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Port of Miami in Florida
Ports along the East and Gulf coasts, such as the Port of Miami, above, should prepare now to receive larger ships once the expansion of the Panama Canal has been completed, according to a report by the U.S. Army Corps of Engineers. Wikimedia Commons 

A U.S. Army Corps of Engineers report says East Coast and Gulf Coast ports should begin to prepare now for the larger ships that will travel through the Panama Canal when its renovation is completed in 2014. 

July 3, 2012—Following the completion of the expansion of the Panama Canal in 2014, many vessels that currently are too large to pass through the canal will be able to do so, giving them readier access to certain U.S. ports, particularly those in the Southeast and along the Gulf Coast. Although the full ramifications of this change are not yet entirely known, the anticipated influx of larger ships carrying greater volumes of goods may justify expansion projects at certain Southeast and Gulf Coast ports, according to a recent report by the Institute for Water Resources within the U.S. Army Corps of Engineers.

Released on June 21, the report—titled U.S. Port and Inland Waterways Modernization: Preparing for Post-Panamax Vessels—was prepared at the request of the U.S. Congress. Last December, lawmakers included a provision in the Consolidated Appropriations Act of 2012 (P.L. 112-74) directing the Corps to make recommendations within six months as to how Congress should approach the issue of modernizing U.S. ports and inland waterways to accommodate the so-called post-Panamax vessels—that is, ships too large to traverse the existing Panama Canal. Although such ships are in the minority today, they handle significant volumes of goods, a situation that is only expected to increase. For example, post-Panamax ships currently comprise 16 percent of the world’s container fleet, but provide 45 percent of its capacity. However, by 2030, post-Panamax vessels are expected to account for 27 percent of the world’s container fleet and 62 percent of its capacity, according to the Corps’s report.

Whereas the Panama Canal’s existing locks can handle ships up to 965 ft long and 106 ft wide, the new locks under construction will be able to accommodate vessels as long as 1,200 ft and as wide as 160 ft. For the purposes of the Corps, a port is deemed capable of accommodating post-Panamax ships “if it has a channel depth of about 50 feet with allowances for tide, as well as sufficient channel width, turning basin size, [and] dock and crane capacity,” according to the report. On the West Coast, the ports of Seattle, Oakland, Los Angeles, and Long Beach already have 50 ft deep channels, and three eastern ports—New York, Baltimore, and Hampton Roads, Virginia—are expected to have such channels ready by 2014. By contrast, “there is currently a lack of post-Panamax capacity at U.S. Gulf and South Atlantic ports—the very regions geographically positioned to potentially be most impacted by the expected changes in the world fleet,” the report states. (Some East and Gulf Coast ports have already made such plans, but have encountered difficulties in implementing them; read “Ports Plan for New Vessels.”)

Along with facilitating the passage of post-Panamax ships, the expanded Panama Canal will have twice the capacity that it currently has. These changes are “expected to potentially have at least three major market effects,” according to the report. First, the common practice in which goods from Asia are shipped to western U.S. ports and then hauled by rail to the eastern half of the country may decrease over time, if shippers find it cheaper to send goods by water directly to eastern ports. “The potential for reduced cost of the water route through the canal may cause freight traffic to shift from West Coast to East Coast ports,” the report states.

Second, a transshipment service could arise in the Caribbean or at a large U.S. port to “take full advantage of the very largest vessels that will be able to fit through the expanded canal but may be too large to call at most U.S. ports,” according to the report. Such a service would entail unloading shipping containers at the transshipment hub and reloading them onto smaller vessels that would deliver the goods to ports with smaller channels.

Third, the availability of larger bulk vessels could “significantly lower the delivery cost of U.S. agricultural exports to Asia and other foreign markets,” increasing the quantity of agricultural goods transported down the Mississippi River for export at New Orleans, according to the report. 

Port of Long Beach in California 

The ports along the West Coast, including the Port of Long Beach,
above, have already made appropriate accommodations for larger
ships and increased cargo, the report states. Wikimedia
Commons/James R. Tourtellotte
 

For its part, the Corps is currently conducting 17 investigations of possible port improvements that are mostly associated with the “desire to be post-Panamax ready,” according to the report. Of these investigations, a study involving the Port of Savannah is nearly complete and indicates that a project estimated to cost $652 million can be economically justified. “It is likely that other studies will also show economically justified projects,” the report states.

However, not all such projects necessarily would take the form of upgrading ports to make them ready for post-Panamax vessels. Instead, some projects would involve deepening channels to ensure that ports are prepared for what is known as the “cascade effect.” The phrase refers to the idea that as more post-Panamax vessels call at ports that can accommodate them, the next-smaller sized ships would be redeployed to the next most-efficient port, which may not be ready at this time to handle that size of ship.

All told, the preliminary estimate for expanding ports to accommodate these cascading requirements total between $3 billion and $5 billion, according to the report. By comparison, the Corps’s Civil Works Program for waterside infrastructure has received on average between $1.5 billion and $2 billion in annual appropriations during the past decade.

Although the Corps does not make any recommendations as to how improvements related to post-Panamax ships should be funded, the report lists several potential options for Congress to consider. Among them are increasing federal appropriations to the Corps for harbor maintenance and improvements, increasing current cost-share requirements for local sponsors, increasing user fees paid into the Harbor Maintenance Trust Fund and dedicating the additional revenues to harbor improvements, and phasing out the Harbor Maintenance Trust Fund and leaving individual ports to collect their own fees and decide how to spend the revenue.

As noted earlier, the Mississippi River may see increased traffic related to agricultural exports following the completion of the Panama Canal expansion. Currently, the waterway has sufficient capacity to meet an increase in demand, but only if it is adequately maintained, according to the report. However, no additional lock capacity is needed on the Mississippi River, the report stated.

Any efforts to modernize U.S. ports should be “part of an overall national intermodal freight transportation strategy” that seeks to facilitate intermodal linkages as much as possible, according to the report. “While the three dominant freight carrier modes—water, rail, and truck—compete for market share, there is a growing recognition of the need for multimodal linkages and for infrastructure investments to be coordinated across the modes to ensure that they complement each other and ensure the best overall use of the available funds for the nation,” the report states.

—Jay Landers 


 

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