The shipping capacity of the Panama Canal will expand substantially when construction work finishes next year. What effect will this have on logistics facilities in the UK and abroad – and will they be able to take advantage? Paul Strohm finds out
Work is under way to double the capacity of the Panama Canal, including the construction of massive new locks that will enable it to handle container vessels more than twice the size of the present maximum. It’s a huge change for one of the most important waterways in the world. So what does the logistics property business in the UK and Europe need to do to be ready?
The largest ships able to use the Panama Canal at present are known as “Panamax” vessels and are designed to fit the existing lock chambers that provide access at each end of the canal. These locks are 965ft long, 106ft wide and allow for ships with a draft of about 39.5ft.
When the canal was originally completed 100 years ago, these dimensions were adequate. But modern ship design means that a significant portion of the world’s shipping simply cannot fit through the canal today.
Hence the Panama Canal Expansion Project, which began officially on September 2007, following a national referendum. The Panama Canal Authority originally intended the project to be completed in 2014, to coincide with the canal’s centenary. Delays have shifted the expected completion date to December 2015.
The expansion project includes the construction of two lock complexes, one at each end of the canal, each of which consists of three chambers and includes three water-saving basins, effectively forming a new shipping lane. Access channels are being cut for the new locks, and existing navigational channels are being widened, while the maximum operating level of Gatun Lake is being increased. Gatun is a 166-sq mile?artificial lake in central Panama that forms a key part of the canal system.
The expansion was originally projected to cost about $5.2bn, including $3.2bn for a fixed-cost design-build contract to provide the new locks. It is being financed through the canal’s toll system and loans from overseas banks.
Once the canal expansion is complete, larger ships, known as a “Post-Panamax” vessels, with a 50ft draft, should be able to pass the short way from ocean to ocean.
The existing locks allow ships capable of carrying up to 5,000 containers – also known as twenty-foot equivalent units (TEUs) – to pass through. Once the expansion is completed, this capacity will increase to 13,000-TEU vessels.
The increased capacity of the canal is thought likely to affect ports on the eastern seaboard of the US, which will be more easily accessible from Asia. But in the UK, Liverpool has been gearing up for a potential increase in traffic based on larger ship sizes.
The Port of Long Beach already has several container terminals ready to receive big ships, but is spending a further $4.5bn on capital improvements.
The Port Authority of New York and New Jersey has committed $4bn to its capacity improvements, while Port Miami, along with the state of Florida and federal and private-sector partners, is investing more than $2bn.
The Panama Canal expansion is not the only reason for the investment.
Bill Waxman, the Saddle Brook, New Jersey-based executive vice-president of CBRE, with responsibility for port logistics, says: “I do not think that [the Panama Canal expansion] will change things very much, though it could certainly reduce the cost of shipping goods from Asia to the East Coast per tonne-mile.”
Waxman believes that fewer ships, each carrying more cargo, will travel through the canal, with no net increase in container traffic – although this does mean an improvement in carbon emissions because fewer ships will be running.
“In Europe there will be minimal difference,” Waxman states. “It will still be better to use the Suez Canal to go to and from China.”
Last year Peel Ports started construction of Liverpool2, the city’s new deep-water container terminal, which is being built at a cost of £300m. The two-year project will provide a new 854m quay, designed to accommodate vessels of up to 13,500 TEUs.
About 17ha of land will be created by infilling, which will double the container capacity of the port of Liverpool. A new 16.5m-deep, 62m-wide berthing pocket will be dredged out and long-reach cranes will be installed.
Liverpool City Region Superport recently sent a delegation to Panama to build commercial relationships with Latin America.
More than £1bn is being invested in the wider Liverpool City Region Superport scheme, with the intention of making it a global freight and logistics hub for the UK and Ireland.
The port of Liverpool already handles 45% of all UK container traffic with North America. The Local Enterprise Partnership says that, with the development of its own deep-water port facility at Liverpool2, it will have the capacity to handle the largest vessels travelling through the expanded Panama Canal – and, with it, a significant proportion of the UK’s trade with Latin America.
Colliers chief economist Walter Boettcher says that any developments that improve the efficiency of transport and the circulation of goods will have a positive effect worldwide. “Shorter transit times mean shipping capacity will increase accordingly across all routes, as fewer ships will be needed to carry the same transit load, owing to shorter transit times,” he says.
“Increased capacity will moderate shipping costs. Ships that travel from the Far East to the US East Coast via the Panama Canal will not necessarily return to the Far East via the canal, but are likely to pick up transatlantic loads destined for the UK and Europe.”
New container terminal at Liverpool will help the UK take advantage of increased trade with Latin America
Liverpool City Region LEP recently commissioned agents network NAI Global to conduct an analysis of the land and property market that would be affected by the Liverpool Superport.
NAI Global concluded that the implications of the Panama Canal expansion for the Superport were difficult to judge. But it did say that there were indirect benefits, such as the improved health of the US ports that the city deals with already, and the increased focus on trade with Latin America as a whole.
However, the creation of Liverpool2 is not just about shipping facilities.
Mark Basnett, executive director of Liverpool City Region’s Superport initiative, says that at present the port of Liverpool serves 45% of the US containerised traffic that comes to the UK, but little Latin American traffic.
The new facilities will provide an opportunity for increased freight between the UK and Latin America.
Superport aims to promote the Liverpool area as a global logistics hub for the northern UK. Basnett points out that there are other container ports in the UK, but not in a northern location.
“Some 50% of goods traded globally from the UK originate from Birmingham northwards, but 90% goes through southern ports,” he says.
Using Liverpool as a global freight and logistics hub would shift transport away from road and rail, improving cost and carbon efficiency. “The model for the UK is not as efficient as it could be,” Basnett says.
The North of the UK is a large market. “Within a two-hour drive of the port the catchment is the densest in the UK (outside London and the South East) for retail, logistics and manufacturing,” Basnett says, adding that 17m people reside within that two-hour catchment area.
