Shifting Ports of Call
Panama Canal Expansion Expected to Bring Larger Ships to the Atlantic, Gulf Coasts
By Mary Branham, CSG Managing Editor
In 1986, the U.S. Army Corps of Engineers granted permission for the Port of Virginia to dredge its channels to 55 feet, primarily because of the demand for U.S. coal.
Action to address those export needs has put the Port of Virginia at Norfolk in prime position to benefit from the Panama Canal expansion, expected to be completed in 2014.
“Many ports along the East Coast are trying to get to 50 feet, and I wish them well, but I’m not sure they’re going to get there by 2014,” said Jeff Keever, senior deputy executive director for external affairs for the Virginia Port Authority.
That deep water is necessary to handle the massive ships expected to eventually descend on the Atlantic and Gulf coast ports when the Panama Canal expansion is completed. Currently, ships that are about 13 containers across can travel through the canal. Once the expansion is completed, much larger ships that are 22 containers wide will be able to travel through it.
Ports along the Atlantic and Gulf coasts have been scrambling to prepare since Panama announced its decision in 2007 to expand the canal.
“Obviously, the impetus is that ports are trying to get a piece of the action because they see this incredible expansion in trade and exports,” said Sujit CanagaRetna, senior fiscal analyst for The Council of State Governments’ Southern office, who has studied the impact of the Panama Canal expansion on Southern ports. “They feel this is one way we can really stimulate growth, not just at the port, but across the state and across the region.”
Recession Slowed Preparation
But a large investment is needed to be competitive.
The Port of Savannah in Georgia is one example. To be able to handle these larger ships, CanagaRetna said, the state and federal government must make a $569 million investment, with the state footing one-third of the bill. Georgia has allocated its portion, but a holdup might come with the federal funding.
“It’s not a full-on effort and the reason for that is because an important component of necessary funding is missing and that is the federal piece,” said CanagaRetna.
While the Great Recession slowed some of those efforts to prepare, CanagaRetna said many states and localities continued the investment because they view the ports as huge economic drivers.
Take Virginia, where ports in Norfolk and Richmond support 343,000 jobs, about 9 percent of the resident workforce, according to Keever.
The Port of Virginia has invested money in container terminal improvements and larger cranes, a $450 million renovation of those facilities. Keever said the port used terminal revenue from customers and some of the Commonwealth Port Fund—money the ports receive from the state transportation trust fund that can be used for capital projects—to finance the improvements.
“We hope Virginia can capitalize on the improvements that we’ve made in anticipation of this increased volume,” Keever said.
As do other states. South Carolina Gov. Nikki Haley wants to create an infrastructure fund to pay for deepening the Port of Charleston. New York and New Jersey plan to raise the Bayonne Bridge, which currently blocks the wider—and taller—ships they hope to attract.
Florida’s 2010 state budget includes a $1 million line item for an intermodal logistics center to improve infrastructure in the port area, according to CanagaRetna’s 2010 report, “The Panama Canal Expansion and SLC State Ports.”
The West Prepares
But while the Atlantic and Gulf coasts are hoping for a spike in traffic, the West Coast port aren’t conceding the business.
“What you’ve got is ports around the country that are gearing up facilities to grow their own markets and increase their market share,” said Geraldine Knatz, executive director of the Port of Los Angeles, the nation’s number one port destination.
While the ports in the South and East are touting their proximity to the majority of the U.S. population, the Port of Los Angeles contends it is unmatched in facilities and speed to market. Knatz said ships from Asia that offload at the Port of Los Angeles can get their cargo to the densely populated states in the eastern United States seven to 10 days sooner than if the ships went through the Panama Canal to the ports in Virginia, Savannah or New Orleans.
Knatz said 100 trains leave the California port each day. The two Western railroads have a good relationship with the Port of Los Angeles and know what is at stake, she said.
“The rates they charge will make a big difference as to whether cargo will go through the canal or by rail,” she said. “They don’t intend to lose market share either.”
The Port of Los Angeles handled 8.5 million containers in 2006; that dropped to 6.7 million containers in 2009 because of the economy, but rebounded to 7.8 million containers in 2010.
Knatz noted that the Port of Los Angeles is at 53 feet channel depth, and only Virginia and New York—which has accessibility problems because of the Bayonne Bridge—are deep enough to handle the size of ships anticipated to be making the move.
The Port of Los Angeles isn’t resting on its laurels. Knatz said stakeholders have been working on competitive issues, including implementing an automation system to better serve customers.
While the Port of Los Angeles is a municipal facility, Knatz said state leaders are rallying to help the port remain competitive. They recognize the economic impact of the port—1 million jobs in the state depend on the port, she said.
“The whole idea of the canal has really given us a lot more support, which is good,” said Knatz.
Timeline for Change
No one expects a change in the port picture to happen overnight. Some Atlantic and Gulf coast ports need extensive renovation, and the transportation infrastructure outside the ports could have an impact.
“We stand to lose our competitive edge because we are not making fundamental infrastructure investments that are necessary for us to be competitive vis-à-vis the rest of the world,” said CanagaRetna.
He notes that the U.S. export market has been one bright spot in an otherwise dismal economy. The ports—regardless of location—will play a key role in ensuring that continues.
“The challenge is to make sure that this export-led growth continues,” CanagaRetna said. “You need these ports to be a conduit for this impressive flow of trade both into and out of the United States.”