December 26, 2008 Expanding Channels

Volume 11 | Issue 6

Expansion of the Panama Canal precipitates growth and investment for Alabama State Port Authority.

The Panamanian government’s master plan to expand its channels at Gatun Lake and Culebra Cut, complete five dry excavation projects and construct two new sets of locks will create by 2014 a new and improved Western Hemisphere gateway to Asian trade. Approved by Panamanian voters, funded and with construction underway, the Panama Canal, in its 94th year, is preparing for tomorrow. For many of those engaged in global economies and trade, the new set of locks can’t happen too soon. Larger vessels, which currently cannot transit the canal, are in higher demand by shippers seeking economies of scale in ocean carriage. The canal’s current capacity constraints are pushing up costs to transit the existing locks as demonstrated by slot auction wait lists and pricing. And, cargo throughput pressures in U.S. West Coast ports must be alleviated to abate increasing transportation costs and congestion. The added capacity at the Panama Canal, when the project is completed, will afford much needed relief from these pressures, as well as expand Far East trade opportunities for U.S. Gulf and Latin American ports.

Since 2000, the Alabama State Port Authority has invested in excess of $500 million USD in port infrastructure and seen throughput volumes at its public terminals increase from 19 million tons to more than 28 million tons. The port’s expansion and enhancement programs are intended to ready its current and potential customer base for expanded trade and vessel services, particularly that which would be derived from an expanded canal. The Port Authority’s priorities were to serve a rapidly expanding manufacturing sector in our state and region with terminals capable of handling containerized cargo, expanding volumes and larger vessels to support growth markets in the Far East and Latin America.

Traditionally, the Port of Mobile was more noted for its breakbulk and bulk handling facilities. Forest products, aggregates, ores, coal, and grain dominated the commodity export lists for decades building upon the region’s rich natural resources. Much of our trade moved to and from Europe, the Caribbean, and the Mediterranean. Our region also exported to consumers in the Far East, primarily Japan, as its demand for U.S. forest products, grains and fuel provided opportunities for Alabama and Southeast U.S. regional producers. As Asia’s economies grew in Korea, Thailand and China, so did Asian trade opportunities, and ultimately Asian investment, in the state and region. Automotive, chemical, and electronics manufacturing along with the U.S.’ insatiable appetite for low cost, consumer goods laid the foundation for the rapid changes in how the world shipped products. Many of the investments in our region were made by manufacturers and distribution interests that relied on containerized shipping for the delivery of semi-finished materials, components and electronics. The Port of Mobile noted that if it were to serve the changing manufacturing base in the region, it too would have to make investments in port infrastructure to accommodate demand.

PORT OF NECESSITY
The Port Authority set out to construct a centrally located, northern Gulf marine and rail intermodal terminals that ultimately would provide shippers with efficient and cost effective access to and from Southeast and Midwest U.S. markets. In the containerized cargo market, the Port Authority was successful in securing a private investor, Mobile Container Terminal, LLC to share in the cost of a new, $300 million container terminal. Mobile Container Terminal LLC is a joint venture between APM Terminals North America and CMA CGM and their goal was to establish a new, multi-carrier U.S. gateway to alleviate congestion and position customers closer to their markets. The new marine terminal opened this month to provide not only much needed capacity for existing Far East trade, but to ready the port for larger vessels that will make transit through an expanded canal into less congested ports. Mobile Container Terminal’s initial Phase I capacity is 350,000 TEUs with Phase II construction underway expanding capacity to 850,000 TEUs.

The Port Authority knew the marine terminal investment would not be enough as industry analysts projected increasing volumes flowing westward from Asian manufacturers. Once Asian products hit U.S. shores, increasing congestion on North American highways necessitated investments in long haul rail to move cargo out of seaports and into hinterland markets. This year, the Port Authority began site work on its future rail intermodal facility. This $50 million, Phase I Intermodal Container Transfer Facility (ICTF) investment will extend the Port of Mobile’s long haul reach for import and export products to and from upper Midwest and Appalachian markets. The Port Authority’s planned 80-acre, ICTF will augment services provided by the new container marine terminal and connect shippers, via multiple 8,000 foot tracks, to five Class I railroads capable of reaching most North American destinations.

So, while we prepare, the Panamanians are also preparing. That parallel path of investment in maritime infrastructure will reap not only new opportunities in East/West trade, but change the dynamics of the shipping business. The Port of Mobile is ready.

James K. Lyons is director & CEO of the Alabama State Port Authority. Visit www.asdd.com.

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