Panama Canal: Automation jitters to drive cargo to East Coast

Panama Canal: Automation jitters to drive cargo to East Coast

The ILWU has been able to delay the project, even though it agreed in its 2008 contact not to interfere in terminal operators’ plans to automate their facilities. Photo credit: Shutterstock.com.

 

SINGAPORE — The Panama Canal Authority said it expects concerns over a labor backlash to the automation of a Los Angeles marine terminal to spur the routing of more containerized cargo from Asia through the waterway to East and Gulf coast ports. Several beneficial cargo owners, however, told JOC.com that they don't expect the fight over automation to affect West Coast port productivity, thus making it a non-factor in terms of their routing decisions. 

In an interview with JOC.com, Jorge Luis Quijano, administrator and chief executive of the Panama Canal Authority, said shipping lines don’t like the uncertainty of what could happen if the International Longshore and Warehouse Union (ILWU) continues to oppose automation. The ILWU has been able to delay the project, even though it agreed in its 2008 contact not to interfere in terminal operators’ plans to automate their facilities in exchange for a much improved pensions and benefits package. Under the contract's "no strike" provision, the ILWU is prohibited from taking coastwide job actions. 

“Customers will look for alternatives. One has told me, ‘We’ve got ships that float; we can take them anywhere.’ People have to be very careful when they do things,” Quijano said. “Automation is already here. It may not be something that is having an immediate impact but it is coming.”

The Los Angeles Harbor Commission is due to decide at its April 16 meeting whether to approve a construction permit needed by APM to go ahead with plans to create a 100-acre section within its 440-acre terminal that will be used by autonomous straddle carriers.

Quijano, who pointed out canal fees will likely remain unchanged this year, said the canal has already captured volumes from the US West Coast ports since the opening of the canal’s third set of locks in mid-2016. Silvia de Marucci, head of market analysis at the Panama Canal Authority, said 50.8 percent of the vessels using the neo-Panamax locks are container ships.

"We are [already] handling 14,000-TEU ships,” Quijano said. "We still see growth in the number of container ships. We are now moving up to 15,000-TEU ships.”

The Panama Canal saw 4.4 percent growth in Asia-US East Coast container cargo tonnage last year compared with 2017, while the canal's total container trade rose 5 percent, Quijano said.

The US West Coast’s share of Asian imports has dropped from 79 percent in 2006 to 64.2 percent in 2018, while the East Coast’s market share increased from 19.9 percent in 2006 to 31.3 percent last year. The Gulf Coast’s market share increased from 0.7 percent in 2006 to 4.1 percent in 2018, according to PIERS, a sister product of JOC.com within IHS Markit.

Quijano said carriers’ shift to burning low-sulfur fuel to meet the International Maritime Organization's tougher 2020 emission control rules, starting Jan. 1, would benefit the canal as more operators calling the US East Coast cut transit times in the face of higher fuel costs.

“With fuel prices of $500-600 a tonne we'll see a positive outcome. On the headhaul, which carries a lot of high value cargo, we're still the most economic route” with a time savings of around a week for 13,000-14,000 TEU vessels sailing to the US East Coast compared with the Suez Canal.

Contact Keith Wallis at keithwallis@hotmail.com.