A funny thing happened on the way to the 2014 completion of the new Panama Canal locks. The volume of containers moving from Asia to U.S. East Coast ports via the Suez Canal took off.
The reason is pure economics. Ocean carriers can lower their slot costs by deploying post-Panamax ships that can carry more than twice as many containers as Panamax-size vessels, the largest that can transit the Panama Canal.
In the last year or so, post-Panamax ships with capacity of more than 9,000 20-foot equivalent units started calling at East Coast ports, coming from India, Southeast Asia and as far north as Hong Kong. While the volume of containers that move on Panamax ships of up to 4,800 TEUs via all-water services through Panama is still far higher, the volume on post-Panamax ships via the Suez is growing faster.
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“All-water services from Asia to the East Coast via Panama simply can’t make money now because the slot costs and the bunker costs are too high vs. the rates,” said Jim Newsome, president and CEO of the South Carolina Ports Authority. “Lines are looking to reinvent themselves as cost leaders, so they are looking to achieve the lowest costs.”
The cargo moving to the East Coast through the Suez Canal represents new volume. “The world is so focused on the post-Panamax all-water route through Panama, but I firmly believe that the Suez service offers the cargo opportunities for East Coast ports rather than cargo diversion from the West Coast that we’ll see with the post-Panamax ships coming through Panama after 2014,” said Paul Anderson, the Port of Jacksonville’s CEO. “Post-Panamax is an oxymoron. We are already handling post-Panamax, Suez-class vessels.”
Most of the big ports already are handling some of the smaller post-Panamax ships, even though they haven’t completed all the dredging and infrastructure work they will have to finish by 2014 to handle bigger post-Panamax ships.
“We’re seeing more cargo because it’s coming on bigger ships,” said Richard Larrabee, port commerce director at the Port of New York and New Jersey.
One of the carriers fueling this growth is Mediterranean Shipping, which has added calls at the ports of New York-New Jersey, Baltimore, Savannah, Charleston and Norfolk from the Far East through its Golden Gate Service. That service deploys ships ranging in capacity from 6,700 to 9,200 TEUs.
Other carriers that call at East Coast ports with services from Asia via the Suez include CMA CGM, APL, Maersk Line and the Green Alliance of Cosco, “K” Line, Yang Ming and Hanjin. The big ships in these services transport consumer imports from Asia and return with exports, especially agricultural products for the burgeoning middle class in China and throughout Asia.
Call it a rehearsal for the time when ships of up to 12,500 TEUs will be able to move through the third set of locks at the Panama Canal at the end of 2014. “The 9,000-TEU class vessels included in this Suez Canal route represent the future of U.S.-Asia shipping,” said Curtis J. Foltz, executive director of the Georgia Ports Authority. “The economy of scale in this size ship will make it the dominant choice in global trade, especially after an expanded Panama Canal opens in 2014, allowing Pacific routes for post-Panamax vessels.”
Most East Coast gateways won’t be ready to handle the biggest ships coming through the new locks when they open because their harbors won’t be deep enough to handle fully loaded post-Panamax ships.
The ports of Portsmouth and Norfolk, Va., are all set, with a ship channel and berths at their container terminals that are already 50 feet deep. The ports of New York and New Jersey, Baltimore and Miami will also be ready with 50 feet of water depth, but the deepening of harbors at Charleston and Jacksonville will take another few years, and the Savannah Harbor Expansion Project will only deepen the Savannah River channel up to the port to 48 feet, if it is completed on time by 2014.
The Port of New York and New Jersey, which has been dredging for years, will complete a 50-foot channel to the New Jersey container terminals in Port Newark, Port Elizabeth and Port Jersey by the end of this year and to the New York Container Terminal on Staten Island by the end of 2013. “By the time the Panama Canal opens, we’re completely done,” Larrabee said.
Done with dredging, that is. The port still needs to fix the low air draft of the Bayonne Bridge, which, at 151 feet, prohibits some post-Panamax ships from passing underneath on their way to four of the port’s biggest container terminals on the west side of the harbor. The port authority plans to raise the air draft 61 feet by lifting the four-lane highway across the bridge, but first the U.S. Coast Guard and other agencies must complete a study of the project’s impact on the environment and on the bridge’s historic structure.
Once those studies are done by the end of the year, construction can begin. In the first phase, traffic will be diverted onto two lanes on one side of the bridge, with one in each direction, while the lanes on other half of the bridge are rebuilt 61 feet higher. After construction of the two new lanes is finished, by 2016, vehicle traffic will be diverted onto the new lanes while the remaining lower lanes are taken down, thus eliminating the barrier to post-Panamax vessels passing under. The other two lanes will then be rebuilt at the same height, a process that could take another two years.
At Savannah, the East Coast’s second-largest container port, the start of the long-planned project to deepen the Savannah River to 48 feet from its current 42 feet depth awaits final approval from four U.S. government agencies: the Army Corps of Engineers, the Interior and Commerce departments and the Environmental Protection Agency. Despite passage this winter of a joint resolution by South Carolina’s Legislature that tries to revoke that state’s permit to allow the dredging, the Georgia Ports Authority expects the approval process to wrap up by the end of 2012.
“It’s fairly straightforward at this point,” GPA Director Foltz said. “There will be a civil works review in March, where all the agency heads come together. We expect them to proceed from there with a record of decision expected in mid- to late summer.” That decision will trigger eight months of environmental preparation, followed by the start of dredging, which the GPA expects to complete in 2014.
Baltimore will a have 50-foot berth by the end of this year at its Seagirt Container Terminal, where Ports America is investing $105 million to build and deepen a fourth berth. The berth-side depth already is dredged to that depth and “the berth, without the new cranes on it, will be finished within the next two months,” said Jim White, executive director of the Maryland Port Administration.
At that point, Ports America could start using the new berth by rolling other cranes down to the new berth until the four new ZMPT super post-Panamax ship-to-shore cranes arrive in May and become operational during the summer, bringing Seagirt’s total to 11 cranes.
Charleston, which has a harbor depth of 45 feet at low tide, can only accommodate post-Panamax vessels at high tide twice a day when the depth reaches 48 feet. It is in the beginning stages of the long path to getting approval to deepen the harbor to 50 feet.
The Army Corps completed a Reconnaissance Study in 2010 that said the port is “the cheapest South Atlantic harbor to deepen to 50 feet.” It estimated the project would deliver $106 million in net benefits annually for an approximately $140 million federal investment. The total deepening project is estimated at $300 million. But the corps estimated the project cannot be completed until 20124, which Newsome called “just too long.”
The fate of the planned $300 million Hanjin Container Terminal at the Port of Jacksonville hangs in the balance, awaiting funding from the U.S. government for two projects, one to mitigate the tidal flow at Milepoint that limits access times at the entrance to its ship channel and the other to deepen the channel from 40 feet to at least 48 feet.
If the Corps of Engineers authorizes deepening the harbor only to 48 feet, the original target depth, Jaxport and the state will have to raise the added funds to deepen the channel the additional two feet to 50 feet.
The Port of Miami, which has all the permits needed to deepen much of its harbor to 52 feet, hit what it considers a temporary roadblock in December when a group of environmentalists filed a permit to block dredging.
“I think it’s a nuisance suit,” said Bill Johnson, director of the port, which has been renamed PortMiami. “We are confident we will remain on the schedule to open when the Panama Canal’s new locks open in 2014.”