Gambling on the Panama Canal: Central American container terminals are expanding in expectation of an increase in transhipment traffic from the Canal’s expansion, but which of them will win the extra services?

16 Май

В редакционной статье, построенной в форме беседы, рассматриваются вопросы, связанные с увеличением пропускной способности Панамского канала, а также с проектом создания Никарагуанского канала; приводится характеристика этих каналов. В частности, рассматривается каскадный эффект от реконструкции Панамского канала и риск его избыточной мощности после реконструкции.

In 2016, 101 years after the first ship sailed through the Panama Canal, expansion works on the waterway will be completed that will affect the dynamics of global trade and the regional transhipment market in many unpredictable ways.

As the size of container ships has grown, the size of vessels that the Panama Canal can handle (4,400 teu) has become increasingly insufficient. The expansion that is under way and which is scheduled to be finished by February or March 2016 will triple the maximum capacity of ships that can transit the Canal to between 13,200 and 14,000 teu.

This is widely expected to bring an increase in demand for transhipment in the region. Industry analyst Drewry predicts that the percentage of this increase will be in double figures in 2016 and around 5% a year thereafter.

Michel Donner, a senior analyst at Drewry, told CM: “Larger ships transiting the Panama Canal will seek to make more use of transhipment options, both for hub-and-spoke and relay/interlining. Growth in transhipment activity both in Panama and the wider Central America and Caribbean region seems certain therefore.”

Oscar Bazan, marketing manager of the Panama Canal Authority (ACP), is confident that Asia-US East Coast services, 30% of which currently go through the Suez Canal in Egypt, will slowly be redeployed through Panama. These may travel directly to the US, he said, but they may use Caribbean ports for relay transhipment, providing a boost for the region.

ACP’s CEO Jorge Quijano said recently that the Canal expects the number of these services to increase from 10 to 16-17 a week when the expansion is completed, particularly after months of congestion at US West Coast ports caused by a major labour contract dispute.

In March 2015, he told the Trans-Pacific Maritime Conference that the Panama Canal was a better option for these services than the Suez Canal. “We’re a shorter route, we’re an economical route and we have no pirates,” he said.

Whether services do switch to the Panama Canal depends, of course, on economics, and a key factor in a shipping line’s cost calculations is the Canal’s own tolls. The ACP has been praised by the industry for holding extensive consultations on this issue and accepting some of the industry’s requests, and Bazan is keen to reassure shipping lines and terminal operators.

“Our toll structure is geared to attract volumes. What we are looking for is scale, not just to increase tolls,” he told CM.

As well as cost calculations, shipping lines’ routes will be determined by demand. As Carlos Flaquer, the manager of DP World’s Caucedo Logistics Centre in the Dominican Republic, pointed out: “Nobody really knows what kind of ships will go through the Panama Canal because it’s all about the market. You can have the capacity for 20,000 teu ships to travel through the Canal but it won’t happen if the market doesn’t require it.”

Terminal operators in the region seem to be banking on an increase, as expansions and new-build ports have been launched across the region. On Panama’s Caribbean coast, Colon Container Terminal is being expanded to a capacity of 1.5m teu, while across the Caribbean the US$1bn Terminal de Contenedores de Moin (TCM) is being built, with an initial capacity of 1.3m teu.

On Panama’s Pacific Coast, a new transhipment port in Corozal with a capacity of 5m teu is planned, with a tender opening soon after the Canal expansion is complete. A few kilometres away in Balboa, Hutchison Port Holdings (HPH) is investing US$110m to increase the port’s capacity from 3.2m teu to 5m teu by the time the Canal opens.

Across the water from there, PSA International is investing US$350m to increase the capacity of the Rodman terminal from 450,000 teu to 1.8m teu.

Risk of over-capacity

Together, these three expansions will bring Panama’s Pacific Coast capacity to 12m teu, according to Drewry. However, the analyst predicts that throughput on this coast will not reach 6m teu until 2024, making over-capacity a significant danger.

APM Terminal’s global head of container port business development, Joe Nicklaus Nielsen, agreed. “It is likely that the expansion of the Panama Canal will increase transhipment volumes in both the Pacific and the Caribbean. How much of an increase remains to be seen. With so much capacity already in place, and more projects in the planning stage, it seems likely that the Caribbean transhipment market will remain imbalanced for the foreseeable future,” he said.

Donner told CM: “Ports and terminals are not built in a fortnight so there is always by nature some degree of speculation on the part of developers. The extent to which the shipping lines’ maths will give preference to direct Asia to West Coast of South America services remains to be seen.”

He added: “Careful phasing in of the Pacific Coast terminals’ expansions and of the commissioning of the Corozal project will be key. Similarly, direct Asia to East Coast of South America services are probably here to stay, at least for a while.”

So ports have gambled – and not all of them will win. Jan Tiedemann, shipping analyst at Alphaliner, said that those terminals which are operated by a subsidiary of a shipping line would be at an advantage.

For example, he said, Maersk through APM Terminals has a stake in Moin (TCM) in Costa Rica, MSC through Terminal Investments Limited (TIL) has a stake in Freeport, Bahamas and CMA CGM has invested heavily in Kingston, Jamaica.

Donner told CM that ports closest to the Canal itself should benefit more than others. In 2014, Panama’s ports handled 5.7m teu worth of transhipment, making it the largest hub in the region.

Nicaragua is the wild card

One development that could change everything would be if the proposed Nicaragua Grand Canal is built. This canal would have two deepwater ports, one at either end, with a combined capacity of 4.6m teu and it would be able to accommodate vessels of 20,000 teu, dwarfing the maximum size of those in Panama.

Donner told CM: “The Nicaragua Canal is the wild card in the pack.

The current maximum size of ship (left) and the new maximum ship size (right) that the expanded Panama Canal can handle.

The project remains speculative in the eyes of many observers, despite the recent news that construction has already commenced, not least because of its more than US$50bn price tag. If built, it would inevitably impact on both panama Canal vessel transits and regional container transhipment activity.”

Quijano has admitted that, if built, the Nicaragua Canal could take around 30% of the Panama Canal’s traffic. However, he has criticised the Nicaragua Canal project as not being a sensible investment for a private investor.

He said that that it would cost up to US$70bn and would probably take more than five years to build, as it requires the removal of 5hn cu m of material. This contrasts with the 550m cu m of material that has been excavated or dredged in the history of the Panama Canal.

However, he said, the project is possible, and added: “We should not underestimate them, because it may be for geopolitical reasons that the canal will be built, even without a reasonable rate of return.” He added

that he does not believe the rival canal’s tolls would be competitive with Panama’s unless someone donated money to the project.

In his view, the main long-term threat to the Panama Canal comes not from Nicaragua but from a modernised Suez Canal. In August, Egyptian president General el-Sisi announced an US$8.5bn plan to build a second, parallel Suez Canal, which would allow ships to travel in both directions simultaneously.

However, Panama may have its own plans for even further expansion, with Quijano announcing recently that the ACP had been in talks with Chinese companies interested in building and financing a fourth set of locks, to add to the third set which will be operational in 2016. Building this fourth set of locks, even with a deeper draught and a wider clearance, would cost a fraction of the amount the Nicaragua Canal will cost, according to Quijano.

Cascade effect

Some countries, such as Brazil and Argentina, will remain largely unaffected by the Panama and Nicaragua canals, but one thing that will affect the whole region is the cascading effect.

Quijano has said that he expects the majority of the ships passing through the canal to be around 9,000 teu, and transhipment ports in the area must be ready for these. Ships of this size are arguably becoming redundant on the Asia-Europe and, to a lesser extent, trans-Pacific trade lanes, as ships of 16,000-18,000 teu take their place.

Flaquer at DP World told CM that ports in the area are all readying themselves for these larger ships. The average ship currently handled at Caucedo is 6,000 teu, and he expects this to rise to 10,000-12,000 teu.

As bigger ships can now pass through the Panama Canal, shipping lines will be left with smaller ships that must be allocated elsewhere, Patricio Junior, CEO of Porto Itapoa in Brazil, told CM that many of these ships will be reallocated to ports like his and that all terminals in the region, from the largest to the smallest, need to be ready for this.

Источник: Container Management. – 2015. – April. – P. 22 – 25.