When the APL Egypt pulled into a berth at Manzanillo International Terminal on the Caribbean end of the Panama Canal last February, it took all of a couple minutes for two ship-to-shore cranes to start hoisting containers. Some of those boxes were placed on the pier for transshipment to the much smaller MOL Universe, which would take them down the east coast of South America and 1,000 miles up the Amazon to the busy industrial center at Manaus, Brazil.
The transshipment was routine, one of many that occur every day at all three container terminals in Colon, one of four deep-water hubs in the Caribbean where large container ships offload cargo to feeder ships heading for shallower ports in North and South America.
Not so routine were the passengers on the ship who had a firsthand look at an activity that will expand dramatically at hubs across the Caribbean, in Central America, northern South America and even in the United States after the Panama Canal opens its third set of locks at the end of 2014.
As the hubs gear up for the larger ships, they also could become centers for distribution of retail imports throughout the hemisphere. “The potential for the development of distribution centers around the transshipment hubs is intriguing, not only for distribution into the U.S. but also for South America,” said John Martin, principal of port consultant Martin Associates. “If you break the shipment in the Caribbean, why not think about doing distribution from there?”
He said distribution center developers would be drawn to Caribbean hubs because of low-cost labor and cheap land for development. Other post-Panamax services for the U.S. would call at U.S. East Coast ports directly without stopping at the Caribbean hubs.
“Those ports would continue to serve time-sensitive cargoes,” Martin said. “There will be intermodal services that will call direct at ports like Savannah, Charleston and ports like Baltimore, New York, Miami and Virginia that have 50 feet of water and get the cargo into the Middle West by rail.”
Four ports — Colon; Kingston, Jamaica; Freeport, Bahamas; and Caucedo, Dominican Republic — have traditionally served the transshipment trade for the Americas east of Panama. All three container terminals in Colon are being expanded to handle the projected increase in transshipment cargo.
CMA CGM is investing a reported $100 million in the $780 million expansion of the Kingston Container Terminal, which already serves as a transshipment center for the French carrier’s seven services that call there. Caucedo is investing $150 million over the next four years to build the Caucedo Logistic Center. Freeport is buying new cranes that can handle 24 containers across, compared with the 22 across of its existing cranes.
Three other ports on or close to the Caribbean already are gearing up to handle the boom in cargo that will have to be transshipped from the larger post-Panamax ships to come through the new locks after 2014. The new hubs are Moin in Costa Rica, where APM Terminals is investing almost $1 billion to build and operate a new terminal; Cartagena in Colombia, which plans to double its capacity to 4 million TEUs in the next few years; and the Port of Miami, the only U.S. East Coast port that has a permit and the funding to start deepening its harbor to 50 feet.
A wild card is Cuba, which someday could become a fourth Caribbean transshipment hub.
Sidebar: Express From Cuba?
“Cartagena has a massive expansion project,” said Carlos Velez, the APL vice president who runs its Latin American trade. “It was the most efficient terminal for throughput in containers per meter in the last year.” Hamburg Sud, which specializes in the north-south trades, is a major customer of the port, which handles almost a million of its TEUs every year, but 13 other carriers also call there. “It has very quietly, very steadily been making inroads with the major carriers that are transshipping there,” Velez said.
APL, which conducts all of its transshipment activities at MIT in Colon, uses Cartagena as a destination terminal for Colombian cargo.
APM Terminals, the port-operating division of A.P. Moller-Maersk, is investing almost $1 billion to build a new terminal at Moin to handle refrigerated shipments of the country’s bananas and other fresh produce. “That is sure to become a transshipment port,” Velez said.
But APMT said the terminal is designed as a gateway terminal to handle Costa Rica’s exports and imports. “The terminal will bring a significant improvement to the logistics chain and is a key infrastructure project to improve the competitiveness of the country,” said Paul Gallie, managing director of APM Terminals Moin.
The terminal will have a 52-foot access channel and 47 feet at the berth. “Clearly, the deep-water terminal will be ideally positioned to handle some transshipment traffic, being only 10 hours steaming away from the Panama Canal, but that is not our primary operational focus.”
The third potential new transshipment hub is at the Port of Miami, which is building a rail tunnel under Biscayne Bay by 2014 to carry cargo from the port directly to a new Florida East Coast rail terminal north of the city.
“One port that a lot of people are not paying attention to is Miami,” Velez said. “When the large vessels come through, Miami could become the first port of call in the U.S. You could land a number of hot boxes for express delivery by rail up the coast before that vessel could move up the coast to unload at other East Coast ports.”
At Colon, all three existing terminals are being expanded. Hutchison Ports is investing $1 billion to double capacity at its Cristobal terminal with a new pier this year, to acquire new cranes and add container yard space. Evergreen Marine is investing $200 million as the first step in a three-stage expansion at its Colon Container Terminal at Coco Solo, where it is filling in existing bulk piers to create more berth space for container ships and reclaiming land for another container yard. And at Manzanillo International Terminal, port operator SSA Marine built a 17-acre distribution center next to the Colon Free Trade Zone, and more than half is already in use for cargo consolidation and logistics.
The proliferation and expansion of transshipment ports across the region indicates carriers are likely to adopt a hub-and-spoke pattern of container transshipments from their large post-Panamax east-west services onto smaller ships that will deliver throughout the hemisphere.
“The project to widen the Panama Canal will require a major reorganization of shipping, particularly in the Caribbean and North America region,” said Olivier Tretout, vice president of terminal investments and developments at CMA CGM. “The new Panamax vessels, with capacities up to 12,500 TEUs will be able to cross the canal, compared to the current limit of 4,000 TEUs. Transport distribution will only be possible from a hub that can accommodate these giants. With the expanded Panama Canal, we have to think about future services operating larger vessels.”
Other carriers likewise haven’t figured out how the expanded canal will alter their routes and services. “With year 2014 seemingly still so ‘far away,’ our view is that there will be no changes overall as it pertains to the Freeport Container Terminal and operations in that region,” said Allen Clifford, executive vice president, commercial, of Mediterranean Shipping Co. (USA), which conducts most of its transshipment activities for the hemisphere at Freeport and also transships some containers at Caucedo. “There has been no discussion at MSC at this time pertaining to changes in transshipment or rotations. With the growth of the Panama Canal and the growth of the economy as the years progress, if volumes increase, certainly this will have an effect on Freeport.”
U.S. ports view the future very differently depending on whether they are on the Gulf or the East Coast. “We will have both larger vessels and increased transshipped boxes,” said Jimmy Lyons, director and CEO of the Alabama State Port Authority. Both CMA CGM and Zim Integrated Shipping Services call at Mobile with containers transshipped to and from Kingston. “It could well be that with CMA’s investment in Kingston, they may bring more in here,” he said.
East Coast ports with deep water, by contrast, don’t expect to be seeing much transshipped cargo. “Carriers will want to serve the U.S. directly over East Coast ports, said Jeff Keever, deputy executive director of the Virginia Port Authority.
As the only East Coast port that already has 50 feet of water depth, the Port of Virginia, which has deep-water container terminals in Norfolk and Portsmouth, is looking at the possibility that it could become the sole port on the East Coast that the big post-Panamax ships would call. “We could see the big ships just coming to one port on the East Coast and distributing by rail to the East and Middle West,” Keever said.
“The hub-and spoke system works everywhere else in the world, doesn’t it? When you consider the challenges the other East Coast ports are facing to get to 50 feet, it makes sense to look at hub-and-spoke products,” he said. “You already have big assets coming in here, so they might just call New York and Norfolk.”