From the bridge of a container ship passing through the Panama Canal, the signs of the canal authority’s huge expansion project are clearly visible.
The scarred earth of the new channel where the bigger locks will be built lines the western shore of the canal at the Pacific entrance, and the deep channel for the new locks on the Atlantic side runs parallel to the Gatun Locks. In between, enormous dredges are deepening the entrances to the new channels and in Gatun Lake, where they are deepening the existing channel and clawing away at a small island that sits in the path of a straighter channel that will speed passage.
In a sense, however, the investment behind the scenes is almost as ambitious. That’s the effort being undertaken to expand the infrastructure around the canal with the goal of changing trade flows as surely as the deeper canal is supposed to affect global shipping.
New marine terminals are being built on the Pacific side, the existing terminals on the Atlantic side are being expanded, and zones for warehouses and distribution centers are being enlarged. All of this activity is designed to turn Panama into a strategic business center between east-west trade lanes that will serve as a regional headquarters site for companies, a transshipment hub for carriers and a logistics center for companies distributing goods throughout North and South America — turning Panama, in other words, into the Singapore of the Western Hemisphere.
“For retailers, it’s not just a bigger ditch that can move bigger boats through the canal,” said Casey Chroust, executive vice president of retail operations at the Retail Industry Leaders Association. “It’s about how we can incorporate the Panamanian logistics infrastructure into our supply chain networks to take advantage of cost benefits, service plays and time to market.”
Chroust organized a visit to Panama last month by logistics executives of 20 large U.S. retailers, including Target and Wal-Mart, to get a firsthand look not only at the canal’s work on locks but also at the action on the shore. The retailers are looking at Panama’s potential as a logistics platform when the Panama Canal Authority completes a new set of locks at the end of 2014 that can accommodate ships that can carry twice as much cargo as the existing locks.
“As the expansion of the canal is taking place, it only makes sense to consider the wider logistics alternatives available in Panama,” Chroust said. “The forward looking retailers are in the process of analyzing their distribution networks to capitalize on these advantages.”
The prospects for north-south trade are just as important to the canal as east-west shipping.
As South American raw materials become feeder stocks for growing markets in Asia and the U.S., the Panama Canal Authority is positioning the country as a transshipment hub for raw materials being shipped to Asia as well as for Asian products transshipped to the south. “We are showcasing Panama as the gateway to Latin America and also from Latin America to Asia and the rest of the world,” said Rodolfo Sabonge, the canal authority’s vice president of market research and analysis. “The expanded canal will enable larger ships to not only be able to bring cargo from Asia, but also to Asia.”
The RILA group’s three-day tour was hosted by the canal authority, which showed the retailers the work on the new locks, the plans for new terminals on the Pacific side of the canal, for expanding Panama City’s Tocumen Airport, for expanding the Colon Free Trade Zone and its three container terminals and for building more logistics parks, distribution centers and business centers.
“The business advantages of Panama are growing,” Sabonge said.
In addition to the $5.25 billion the canal authority is spending on the new locks, private terminal companies are spending billions to build new terminals on the Pacific entrance to the canal and to expand existing ports on either end of the canal.
At the Pacific entrance, where Hutchison Port Holdings operates the only existing terminal at Balboa, Panama Ports, there are plans for up to three new terminals.
PSA International of Singapore is building a terminal for containers and roll-on, roll-off cargo at the former Rodman U.S. Navy Base, the PSA Panama International terminal, which is due for completion in May. It has on order two ship-to-shore cranes capable of handling 16 rows across.
Another container terminal is under consideration at Corozal, deeper into the Pacific entrance to the canal. A terminal under discussion is a new or expanded cruise terminal. In addition, HPH is expanding the container yard at its Balboa terminal, which acquired four super-post-Panamax cranes last year, bringing the total to 22, the most of any single terminal in the Western Hemisphere.
At Colon next to the Atlantic entrance, all three existing terminals are being expanded. Hutchison is investing $1 billion to double capacity at its other Panama Ports 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. At Manzanillo International Terminal, 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 canal authority does not directly market the benefits of locating in Panama, but rather does so indirectly. “We are undertaking one of the largest projects in the hemisphere, which is being done on time and under budget,” Sabonge said. “We meet with the largest carriers and the most important traders, who are capable of making decisions.”
One retail logistics executive on the RILA trip last month said the canal authority has set a clear vision for becoming a transshipment hub. “Given that they have free trade zones established on both coasts, they have significant activity moving into and out of Central and South America, and they have the opportunity to develop similar activities for the U.S. trade,” he said.
Contact Peter T. Leach at email@example.com.