The day after we transited the Panama Canal, the ship’s painters were busy covering the damage, albeit cosmetic, to the ship’s sleek white exterior from the rough concrete walls of the locks. The 24-inch clearance on either side of the vessel was obviously not enough.
Behemoth ships, referred to in shipping jargon as “post-panamax,” just don’t fit. Size does matter, however, since the bigger vessels are more cost-effective — carrying nearly three times the 20-foot equivalent unit (TEU) containers as the less-than-lock-sized ships.
Back in 2006, nearly 77 percent of the Panamanian voters approved an ambitious third set of locks project. The reason? More and more ships were transiting a canal built in 1914 that just couldn’t keep up — capacity-wise. Their $5.25 billion expansion solution should be realized in mid-2015.
As of last month, the deepening and widening of Atlantic and Pacific entrance and approach channels as well as the dredging of Culebra Cut, the narrowest part of the canal (located on the Continental Divide) were finished. Yet, work on the innovative locks that feature water-saving basins and rolling gates is only 42 percent completed.
In fact, the project is already eight months behind schedule because of heavy rains, labor strikes and problems with the concrete mix. What also remains is the dredging to increase Lake Gatun’s operational level from 26.7 to 27.1 meters.
All this expensive excavation, construction and material-removal should, according to Panama’s then-President Martin Turrijos, double the capacity of the canal and subsequently generate enough income to not only reduce poverty by 30 percent but to also transform Panama into a First World country. This was a Big Dream.
The U.S. East Coast, you could say, endlessly indulges in trade envy. It lusts after Asia and South America. Why not? The Pacific Rim is home to 29 of the world’s 50 busiest container-shipping ports. The West Coast has been geographically blessed.
Yet, after 2015, when the Panama Canal should be able to accommodate post-panamax ships, Gulf and East Coast ports may appear more appealing to shippers. In fact, many of these harbors have already started investing serious money into infrastructure — betting on a paradigm shift in trade due to the expanded Panama Canal.
So should the powers that be at the Port of Hueneme be concerned?
Kristin Decas is the 44-year old, first female CEO at the fourth-busiest port on the West Coast. But she isn’t exactly shaking in her designer boots.
The Port of Hueneme, according to Commissioner Arlene Fraser, is unique in that it serves niche markets that include the import and export of automobiles, fresh fruit and produce. Consider that bananas — 30 percent of Hueneme’s business — don’t have to come through the Panama Canal. And while cars make up a hefty 60 percent, they don’t have to make the voyage on post-panamax-sized vessels. Nothing may change for Hueneme.
Moreover, Decas — who loved launching the popular Banana Festival last year but loathed hiking tariffs for automobile customers this year — is cautiously optimistic about the economy. The economy is a critical factor to any bottom line.
“Right now, we are seeing healthy recovery,” she told me. “This has been the fourth-best cargo year, and we are continuing to see increases in overall trade.”
The Panama Canal expansion would definitely impact the Port of Hueneme if the ports at Los Angeles and Long Beach, which boast more land and lower operating costs, tried to purloin Hueneme’s customers by undercutting fees.
So what would it take for Los Angeles and Long Beach to go after Hueneme’s automobiles? Without a crystal ball, says Decas, there is really no way of knowing what their diversification strategy might be.
Long Beach and Los Angeles, however, probably won’t be tempted by Hueneme’s 600,000 tons of bananas. According to Port Commission President Jason Hodge, “Here at the Port of Hueneme we continue to modernize with the future in mind.”
To that end, Hueneme is investing $12 million in shore-side power outlets so that refrigerator ships (like those toting bananas) can turn off their engines and plug into zero-polluting power. The bigger ports to the south, however, haven’t yet acquired technology to meet the more stringent air quality standards being required in 2014 for refrigerator ships.
With economists polarized and railroads resistant to change, Decas believes the debate has only just begun. The sea-level canal at Suez, of course, is the elephant in the room. Without locks of any size, it’s a perfect fit for any ship.
Maersk, the world’s largest container shipping line, has already given the Panama Canal the brushoff. To add insult to injury, in 2011 Maersk ordered 20 container ships from Korea’s Daewoo Shipbuilding. They’re too large for Panama’s brand-new expanded locks.
Perhaps, Maersk is the one with a crystal ball.