Trading Route Implications of Widening Panama Canal

ABSRACT The Panama Canal Authority is responding to the necessity to accommodate larger ships through the canal; a 5. 2 billion dollars investment to deepening and widening the canal is in place and expected to conclude on August 2014. The new infrastructure will affect today shipping dynamics and only a few ports on the East Coast of the United States will be ready to receive the post-Panamax vessels; in this document we will discuss what the Miami (FL), Jacksonville (FL) and Freeport TX) are doing to get ready. Trade Route Implications of Widening the Panama Canal

The Panama Canal is about to celebrate its 100 years operations with a 5. 2 billion expansion that will allow a more efficient transit from the Pacific and Atlantic Ocean; the expansion includes deepening and widening the entrances & navigation channels to allow 12,000 TEUs ships to pass; plus and an additional set of locks. Global changes are expected including higher volume of goods from Asia to US and Canada; new markets opportunity for raw materials sourcing; cost-effective routes options and shorter times to mention some of them. Accenture, 2011,page 3 & 4). The US East Coast will be definitely impacted; different ports are already working on its expansions but we cannot tell by certain how, where and what type of impact will land for sure; the fact that larger ships will pass through the canal does not mean that they will stop on all ports or that the trade volume will increase and maintain. During a Seminar organized by the U. S.

Department of Transportation – Federal Highway Administration; Rodolfo Sabonge, Vice President of Market Research and Analysis of the Panama Canal Authority explained that the principle east coast ports to be call for this larger ships are New York, New Jersey, or Norfolk. New York, New Jersey but they would have to work on the bridges issues; in the southeast ports of Charleston, Savannah and Houston where distribution centers are located; the West Coast of Florida is expected to be touch too to serve South Florida.

All this port will face general challenges such as distributions center; connectivity infrastructure to concentrate, load and move the cargo inland; logistics where truck companies will be highly involved, equipment; railroads, inspection and security processes (Sabonge, October, 2009) In the same conference, Richard Wainio, Port director and CEO of the Tampa Port Authority mentioned that Florida, have 14 ports; four of them share the states’ trade: Tampa, Everglades, Miami and Jacksonville.

The port of Tampa manages nearly 40% of the trade by tonnage in Florida and serves local markets; the Port is already planning to build and integrated a logistic center. Everglades & Miami are the largest container ports; while Jacksonville is a key and major player for the Canal Expansion. (Winio, October, 2009) The Port of Miami is already in process of expansion; and the following information is published in their website: “Governor Rick Scott asked the Department of Transportation to allocate $77 million to the Port of Miami to deepen the channel to minus 50 feet so larger ships can gain access to the port.

The Port’s Deep Dredge project is timed to coincide with the opening of an expanded Panama Canal in 2014, which will allow a new generation of larger cargo vessels to pass through the Canal” The dredge in the Port of Miami is expected to generate 30,000 new jobs and become the first port of call for post-Panamax vessels. “The deep dredge is critical to our future growth,” Port of Miami Director Bill Johnson said. “Port of Miami will be one of only three U. S. Atlantic ports to be at [minus] 50 feet when the expanded Panama Canal opens. (Dredging Today, 2012). Additionally, the construction of a tunnel to connect the Port and the I-395 is already in place to support trucks direct access and double port capacity. The US Department of Transportation granted 22. 7M to restore and put in function the Coast Rail Yard in Hialeah which will provide direct access to the national rail system. “This is the type of infrastructure project that will pay permanent, long-term dividends, and provide a solid return on investment for Florida’s taxpayers,” said Mayor Alvarez. (Miami Port, 2012).

On the other hand Freeport, Texas that has served the Gulf Coast for 100 years and its tanked 16th in the U. S for foreign tonnage; as describe in their website a well-built infrastructure for transportation via highway, railroad and intercostal will support the transit for post-Panamax vessels. (Port Freeport, 2012). The Marine Link online magazine published on September 13, 2011 that “the Panama Canal Authority (ACP) and Port Freeport in Texas established a strategic alliance today with the signing of a Memorandum of Understanding (MOU)” that will promote and increase the trade between Asia and Gulf of Mexico of the U.

S. ; the MOU has been signed for one year but renewable upon request. The MOU will play a key piece by allowing both parties to share information to promote market research, modernization and technological improvements in general. “This partnership was perfect for each of us because we are both interested in investing in infrastructure and growth. We each are building new facilities at a time when others are standing on the sidelines so it is only natural that we assist each other in the promotion of international trade in this hemisphere. This partnership is a win, win, for each of us. ” said Pete Reixach CEO of Port Freeport” (para. 4). The Port of Jacksonville employs 23,000 people and impacts an additional 43,000 employees related to the port’s activity. The cargo activity generates 19 billion USD and as mentioned in their website its physical facilities include docks “docks and wharfs, cranes, a passenger cruise terminal, warehouses, paved open storage areas and road connections to the public highway system” (Jacksonville Port Authority, 2012).

On September 27, 2011 Paul Anderson, Jacksonville Port Authority CEO addressed his concerns in a communication “I have no doubt that US East Coast ports will soon be called upon to handle increased volumes but I harbor great doubt as to whether we — any of us — will be ready” (para. 2). Anderson mentions that Congress must act fast and focus on critical investment, prioritization and infrastructure for ports to continue its contribution. The TraPac Container Terminal has been affected in doubling its capacity due to the nations slow down; authorizations and processes.

Also, Korean shipping company Hanjin has put in hold 200 million investments until they understand what the Government is planning to do and invest to be prepared for the post-Panamax ships. As Anderson said “these are our choices: get ready or lose” (para 10). Several considerations must be raised to understand the impact that the Panama Canal expansion will produce, how many deep water ports will be needed to serve post-Panamax ships? Which of those ports will be touched by the ships? How the trade patterns will change?

How much are the investments require to serve the post-Panamax ships and what is the specific infrastructure require at each port and in land? How much is the Government willing to invest in infrastructure? Yes, we should accommodate to globalization; the cost and outcome are unknown yet. On the other hand; infrastructure such ports capacity, extra labor to improve productivity, facilities, equipment; technology and a good connectivity network for in land transportation and railroad are key to the success of these investments.

To conclude, it looks that competition among the Florida coast ports will be hard; Tampa and Miami are getting ready and making its expansion; Jacksonville understand the needs of expansion but is raising very fair questions not only on the projects but to the Government capacity to respond and maintain infrastructure. Are taxpayer’s dollars’ worth the effort? I believe yes if we take quick action to the new requirements and get a clear understanding that we can afford the expansions. I believe the main question is; which port(s) in South Florida will have the final benefits? It will be interesting to find out in some years.

References Accenture. (2011). A global operation game changer. The 2014 expansion of the Panama Canal. Retrieved from http://www. accenture. com/us-en/Pages/insight-2014-expansion-panama-canal. aspx Dredging Today (2012). USA: Miami Port dredging plan gets final environmental ok. Retrieved from http://www. dredgingtoday. com/2012/05/25/usa-miami-port-dredging-plan-gets-final-environmental-ok/ Jacksonville Port Authority. (2011). Anderson addresses Panama Canal expansion concerns. http://www. jaxport. com/about-jaxport/newsroom/news/anderson-addresses-panama-canal-expansion-concerns Marine Link. 2011). Panama Canal and Port Freeport (TX) sign MOU. Retrieved from http://www. marinelink. com/news/freeport-panama-canal340393. aspx Port Freeport (2012) Retrieved from http://www. portfreeport. com/about. htm Port of Miami. (2012). Deep Dredge Project. Retrieved from http://www. miamidade. gov/portofmiami/deep_dredge. asp Sabonge, R. , Wainio, R. , (2009) Proceedings from Talking Freight Seminar Series: The Panama Canal widening and implications for Gulf and Atlantic Coast ports. Retrieved from http://www. fhwa. dot. gov/planning/freight_planning/talking_freight/oct2109transcript. cfm