There is a major debate in the US Congress this month about whether to “earmark” federal funds to expand the capacity of ports in Charleston, South Carolina and Savannah, Georgia. Savannah is seeking $105M to deepen its port in order to accomodate larger container ships. What’s driving the sense of urgency is a multi-year upgrade to the Panama Canal, which will enable larger ships to pass through. Port operators in Savannah and Charleston fear that if the depths of their berths are not upgraded the cargo volumes will shift north to alternative ports. Norfolk and Newark, for example, already have the depth to accommodate larger vessels.
Why Expand the Canal?
The biggest challenge facing the canal is the inability for the existing locks to accommodate today’s larger container ships. These larger vessels, referred to as “Post-Panamax” exceed the usable width and length of the existing locks in many cases. In other cases, the ships exceed the depth of water in the canal or the height of the Bridge of Americas on the Pacific side of the Canal. Operators in Panamaa estimate that by 2011, 37% of capacity volume of the world’s containership fleet will not fit through the Canal.
What are the alternatives transport routes that these larger vessels can utilize?
The most strategic trade lane that the Panama Canal enables is cargo transport from ports in North Asia (Korea, Japan and China) to the East Coast of the US. There are several alternatives to the Panama Canal for the route. The most popular alternative is to ship containers to the West Coast ports of Long Beach, Settle or Portland then connect to intermodal (rail or ground) transportation to the East Coast. The intermodal route requires less time than passing through the Canal. However, intermodal is typically more expensive and faces more potential risks such as longshoreman strikes at West Coast ports. Shipping to ports on the Pacific Coast of Mexico is another alternative. Several Mexican ports now offer intermodal links to rail transport networks which can carry freight to Central US destinations such as Dallas, Kansas City or Chicago. The third alternative is to traverse the coastlines of South America navigating around Cape Horn. Such a journey is more time consuming, but often necessary for very large supertankers and bulk carriers of coal or ore.
Other canals such as the Suez in the Middle East already support larger Post-Panamax vessels. The Suez Canal is the preferred route for goods traveling between South Asia (India, Thailand, Singapore) and the Eastern US ports. However, the Suez Canal has become a riskier channel in recent years due to the widespread threat of Somalian pirates off the East Coast of Africa.
There is a land-based alternative to the Panama Canal which also leverages the Central American Istmus. However, this “dry canal” does not enjoy much volume due to the need to make six intermodal handoffs during the passage. Cargo containers must be unloaded from the ships then transferred to trucks and then to a train in order to make the passage.
About the Expansion Project
The total cost to perform design, administration, construction, testing and commissioning of the third set of locks is estimated to be $5.25B. The construction period will encompass a total of 7 years with the new locks expected to open in 2014. Once completed, the expanded canal will support post-Panamax ships enabling larger military and commercial ships to pass. Maintenance procedures will be simplified. Overall, canal capacity is expected to double with improved operation efficiency and economic benefits to Panama.
Additional information is available on the official Panama Canal web site, which was the source for the content I included in this post. Specifically, I would recommend you read the Panama Canal Expansion Proposal report.