Experts Doubt Panama Canal Expansion Will Be “Game Changer”

The expansion of the Panama Canal to accommodate a new generation of huge cargo ships is not likely to be “a game changer” for United States ports, John Reinhart, the CEO and executive director of the Virginia Port Authority, told an international audience of maritime economists in Norfolk on Wednesday, July 16.

“But we still have to be ready,” Reinhart was quick to add during a panel discussion at the International Association of Marine Economists (IAME) Conference 2014 at the Marriott Waterside. The conference, July 15-18, is hosted by Old Dominion University, Dalhousie University in Nova Scotia, Canada, and Texas A&M University-Galveston.

Once the Panama Canal expansion is completed, expected in early 2016, container ships with double the capacity of most of the larger ships now calling on U.S. ports will be able to pass through it, opening up an alternative – and very cost effective – way for cargo to travel between the Far East and North America.

Currently, West Coast ports such as Los Angeles get the lion’s share of commerce between Far Eastern nations and the United States. But many observers of the shipping scene have predicted that a deeper and wider Panama Canal will result in more of this traffic from China and other nations in the Far East going to ports on the East Coast of the United States.

The IAME conference, which has 220 participants from all over the world, is organized around the title “Maritime Economics in a Post-expansion Panama Canal Era,” and it has been clear during the first two days of the meeting that the canal is topic No. 1 among the academics and industry experts in maritime trade.

But at a panel discussion Wednesday featuring Reinhart and port executives from Los Angeles, Houston, New Orleans and Cartagena, Colombia, the prevailing word was: don’t expect big winners or losers among ports in the United States and the Caribbean. While Reinhart said he thinks the impact of the canal expansion “will be very modest,” he added, “The Port of Virginia is big-ship-ready and we’re doing what we need to do to compete.”

The Port of Virginia, as Reinhart noted, has main channels that are 50 feet deep and able to accommodate the new container ships that can carry 12,000 of the standard 20-foot shipping containers. (12,000 TEU is the term shippers use, for twenty-foot equivalent unit.) New York, the East Coast’s busiest port is busy now dredging channels that are only 37-45 feet deep. Unlike New York, Hampton Roads does not have bridge clearance issues on main shipping channels. (New York is raising the Bayonne Bridge at a cost of $1 billion so that bigger ships can pass underneath; that work is projected to take three more years.)

Furthermore, Reinhart said limited space for the New York port to grow and truck/rail traffic congestion in and around Manhattan are factors that could favor Virginia as new shipping patterns emerge after the Panama Canal expansion.

Geraldine Knatz, who retired earlier this year after eight years as executive director of the Port of Los Angeles, dismissed what she termed as the Panama Canal “hoopla,” and let the audience know that L.A. will fight to retain traffic after the canal expansion. “We really feel that L.A.’s biggest competitor in all this is Long Beach,” the port nearby in California, she said.

Knatz acknowledged that port executives in L.A. are using the canal expansion to leverage concessions and support from government and industry partners such as the railroads. “We have a rallying cry, ‘Beat the Canal,'” she said.

With help from the railroads, containers coming from China and passing through L.A. can get to destinations in the eastern United States faster than containers from China that are shipped through the Panama Canal and on to an East Coast port.

Knatz said L.A. and Long Beach are also focusing on more than just deep channels to get the bigger ships to their ports. Efficient cargo handling may become the main determinant of where a 12,000 TEU ship will call, she added, and both L.A. and Long Beach are investing in automated terminals and other means to get ships unloaded or loaded more quickly.

Roger Guenther, executive director of the Port of Houston, explained the dredging, addition of larger cranes and other enhancements that his facilities have undertaken to accommodate bigger ships. He also said he feels confident that Houston will get its share of the post-canal-expansion traffic due to the “energy sector renaissance in Texas.” Plastic resins made from fossil fuels are in huge demand elsewhere in the world, especially China, and containers filled with grains of this resin already make up about one-third of exports from Houston.

Gary Lagrange, chief executive officer of the Port of New Orleans, said his facility will hold its own because goods coming in there can be barged to so much of America’s heartland.

The timing of the conference – as work on the Panama Canal expansion, which began in 2007, is nearing completion – means that panels and research will focus on the very real issues faced by everyone in the maritime industry, said Wayne Talley, Frederick W. Beazley professor of economics and director of ODU’s Maritime Institute. Talley moderated Wednesday’s panel discussion featuring the port executives.

“The $5.3 billion expansion of the Panama Canal is one of the biggest changes ever faced by the maritime industry. IAME is one of the leading organizations sharing information and scholarship on the impact of such a dramatic shift,” Talley said.

The wider, deeper channels and locks are aimed at serving more massive vessels known as Post-Panamax ships. Over the next decade they should almost double the cargo the canal moves between the Atlantic and Pacific oceans.

IAME is an international forum for the exchange of research and information among those interested in maritime and maritime-related issues. IAME conferences, in particular, provide opportunities for building and strengthening relationships between research and industry communities. Participants at this conference are from Greece, Australia, Canada, Korea, Switzerland, Italy, Taiwan, Belgium and Singapore.

ODU’s expertise in port research stretches back decades, in part because of the university’s location near a major, deepwater port, but also because of the work of ODU faculty researchers.

At a recent IAME annual meeting in Santiago, Chile, worldwide university rankings for port research over the past 30 years were presented. ODU was ranked eighth in the world in these prestigious rankings, second only to the University of Washington in the Western Hemisphere.

“This is a very significant recognition,” Talley said. “It is an incredible honor for Old Dominion University and the local maritime community to host the world’s leading researchers in maritime issues, and have the opportunity to showcase the scholarly maritime research that is being done at ODU.”

Other local participants include the Port of Virginia, the U.S. Army Corps of Engineers and the Virginia Maritime Association.

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Source: Old Dominion University, July 18, 2014