Eastern Ports Scramble to Get Ready for New Panama Canal Era

By: - February 2, 2012 12:00 am

The Port of Savannah hopes that improvements to its harbor will attract larger container ships that will soon be able to fit through the Panama Canal. But the Georgia port has plenty of competition for the larger vessels from other Atlantic ports and from cities on the West Coast that now handle most cargo delivered to the country’s interior.

All along the Eastern Seaboard, hopes for a new maritime-based economic boom are high. Less than three years from now, the Panama Canal is scheduled to open up a new channel that will accommodate ships carrying double the cargo of those that can currently fit through the canal. Bigger ships, the thinking goes, means bigger business for the nation’s Atlantic ports.

To prepare, New York and New Jersey plan to raise a bridge that would currently block taller container ships. Georgia’s governor proposed selling nearly million in bonds to deepen Savannah’s harbor. Baltimore is finishing work on a bigger berth and larger cranes to offload the next class of “post-Panamax” vessels.

“It’s a virtual arms race in the port industry,” says Allison Skipper, a spokeswoman for South Carolina’s Port of Charleston, which is hoping to make up ground it recently ceded to Savannah, its rival in Georgia. Charleston’s deeper harbor, South Carolina officials hope, will put it in a better spot to attract the bigger boats.

South Carolina Governor Nikki Haley told lawmakers last month she wanted to create an infrastructure fund to help pay for further deepening in their state. Federal engineers estimate that dredging a 50-foot channel in the Charleston harbor would cost million. That is a hefty price, but Skipper says it is half the cost of digging out Savannah’s shallower port.

The enthusiasm on the East Coast, though, has not won over skeptics who doubt that the Panama Canal expansion will result in a real economic sea change. From their standpoint, the biggest change of all — a major shift to rely less on West Coast ports and more on East Coast ports – already happened.

A complex process

Today, Norfolk, Virginia, is the only East Coast port that could handle the fully laden vessels that soon might sail through Panama. A few Atlantic ports have handled the larger vessels, which arrive from Europe or through the Suez Canal, but only by waiting for the right tides or servicing ships that are not fully loaded.

New York, Baltimore and Miami are the next in line with improvements that will let them unload fully loaded vessels from the new class of megaships. Baltimore’s improvements are scheduled to be completed in August, but upgrades for the other ports could take years. The process of deepening a harbor depends on numerous approvals from the U.S. Army Corps of Engineers before dredging can even begin. And federal approval is no guarantee of quick action. For example, work on deepening the Port of Miami, which secured a federal blessing for dredging, is now on hold because of litigation over the project’s potential environmental impact.

In the New York area, it is the height of the new ships, rather than their depth, that poses a major problem. Right now, an 80-year-old bridge between Staten Island and New Jersey has such a low clearance that container ships on their way to Newark or Elizabeth sometimes have to wait for low tide before they can pass under. Things would only get worse when ships with containers stacked nine high, rather than the current six, start coming through the Panama Canal. The Port Authority of New York and New Jersey wants to solve that problem by raising the roadway on the Bayonne Bridge by some six stories, which would give ships a clearance of 215 feet, but this work would not be completed until long after the bigger ships can traverse the Panama Canal.

“These are not things that happen in a couple months,” says Sujit CanagaRetna, of the Council of State Governments. “In a way, we are coming to the party late. But it’s better late than never. Policymakers in all these states realize it’s critical for the continued expansion of the economy.”

Western competition

Port consultant John Martin says the idea that the Panama Canal will instantly bring more business to the Eastern Seaboard is an “urban myth.” Whatever business the Atlantic ports could easily take from Los Angeles and other Pacific cities has already moved east, he says.

A 10-day labor lockout on the West Coast nearly a decade ago forced shippers to reconsider their heavy reliance on the Pacific ports. Since then, the haulers increasingly have sent more business east, especially when it comes to cargo destined for or produced by East Coast markets. Because of this, a sizable increase in Eastern port business has already happened. The competition is now over goods going to or arriving from the interior. West Coast ports and the railroads that serve them doubt the Panama Canal expansion will siphon off that business.

“Time-sensitive cargo will typically flow through the West Coast ports which have the infrastructure and technology to process and disperse freight via rail with elevated efficiency, and that doesn’t look like it will change,” says Aaron Hunt, a spokesman for Union Pacific railroad. Krista York-Woolley, a spokesperson for the BNSF railroad system, echoes that sentiment. She says the larger canal is a “positive step toward enhancing world trade” but it would not, on its own, move trade eastward.

Western port officials say they are well-positioned to handle new Eastern competition. The two ports in California’s San Pedro Bay (Los Angeles and Long Beach) handle roughly 100 freight trains a day, a volume no other U.S port comes close to approaching, says spokesman Phillip Sanfield. At seven of the port’s eight terminals, trains can be loaded directly from container ships, cutting transit times for goods headed into the nation’s interior.  

Los Angeles’ massive head start in infrastructure brings down shippers’ total costs, argues Kraig Jondle, the port’s director of business and trade development. While shipping freight by water is generally cheaper than moving it by rail, Jondle says the extra time it takes to get goods through the East Coast makes Eastern routes more expensive. For example, he says, moving cargo from Shanghai to Chicago by using New York’s port would take 28 days, with all but two at sea. By comparison, moving the same freight through Los Angeles would only take 18 days — 13 at sea and five on a train.

A changing industry

Regardless, Eastern ports have a lot at stake with their expansion plans. They may not gain as much business as they hope, but without deeper harbors and cranes that can service bigger ships, they will lose future business. Shippers are using bigger and bigger vessels, and ports that cannot handle the larger craft risk being relegated to second-tier status.

The shipping industry may be moving toward a system where increasingly large ships service a decreasing number of ports, CanagaRetna says. That would mean that East Coast ports would be serviced from a hub somewhere in the Caribbean on “feeder” routes.

Whether large ships stop in the Caribbean first or head straight to the United States, the contest among the Eastern ports is about which ones will be the first American ports of call for the new vessels. It is those first destinations that get the most cargo and the most economic benefit.

Editor’s note: The story has been updated to clarify that the Port of Baltimore plans to complete upgrades that will allow it to then handle fully laden post-Panamax ships in August 2012. 

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