Port planner John Vickerman sees the expanded Panama Canal's effect on U.S. trade shaking out in either of two ways.
The expanded canal could significantly alter cargo flows between the Asia and the U.S. if East Coast ports are prepared for the larger ships and the canal authority keeps toll competitive, Vickerman said at an American Association of Port Authorities-sponsored program Monday. Or West Coast ports will continue to dominate Asia container trade because U.S. railroads exert pricing flexibility and canal tolls are set to maximize revenue rather than cargo volume, Vickerman.
The third set of locks being constructed in Panama will more than double the capacity of the canal. Vickerman said vessels of 9,000 to 10,000 TEUs will be the “workhorses” of the enlarged canal.
Vickerman, president of marine architecture and engineering firm Vickerman and Associates, believes the Panama Canal Authority his considering raising tolls as much as 600 percent to help retire the debt on the $5.25 billion project. A carrier operating a string of eight vessels, each with a capacity of 4,300 TEUs, on weekly service now pays about $150 million a year in canal charges. A six-fold toll increase would drive costs up to $1 billion a year, Vickerman said.
The canal must keep an eye on the western railroads, which, Vickerman believes, have pricing flexibility on intermodal moves. “The primary competitor of the Panama Canal is the U.S. railroads,” he said. With a transit time advantage of more than a week for containers routed through the West Coast, the railroads could still charge profitable intermodal rates while protecting their share of time-sensitive, high-value cargo, he said.
Also, the enlarged canal could face competition from other sources, such as the Suez Canal, and potential “dry” canals (rail projects) being considered in Costa Rica and Colombia. An 8,000-TEU ship transiting the Suez Canal today pays $425,000 in tolls, but Vickerman suggested the Suez “could price itself to make it cheaper than the Panama Canal.”