Ripple effects

By M.W.| PORT OF SPAIN

THE wrangling between the Panama Canal Authority and a Spanish-led consortium may soon be settled. Work on the project to expand the canal began again on February 20th, after rows about cost overruns had stalled construction since the start of the year. A preliminary accord between the two parties, reached on February 27th, now sets an end-2015 deadline for completion of the work. For some in the Caribbean, further delays would suit their purposes.

When they eventually swing open, Panama’s new canal locks will reshape the geography of world shipping. The largest ships to squeeze through the existing locks need a water depth of just over 12 metres, and can carry around 4,400 containers. The new locks will accommodate ships which can take almost three times that load and need a draft of over 15 metres.

These monsters will slash shipping costs for Pacific cargo en route for Atlantic ports, and boost the 6% share of world trade that the Panama canal now claims. But few ports have the water depth needed to enable the new Panamax ships to dock. Lots of cargo will be unloaded onto smaller ships at a few “transshipment” hubs, before being shipped to their final destinations, and several Caribbean islands are vying for the business (see map).

Hong Kong-based Hutchison Port Holdings has been ready for years. Its Freeport Container Port on Grand Bahama, a northern island on the Bahamas, opened in 1997; with 16 metres of water depth, it can easily take the giants. There is plenty of land for storage, and a nearby airport. Preliminary work has started for a fifth-phase expansion. Hutchison’s portfolio of ports also includes Balboa and Cristobal, at the Caribbean and Pacific ends of the Panama canal.

Freeport has rivals. It is little more than 100 miles from Miami, which plans next year to complete a $2 billion dredging and investment programme, and will offer a connection to America’s highway network. Further up the eastern seaboard of the United States, ports in Norfolk, Baltimore and New York will also be able to host the new ships. For America, onshore hubs have security advantages; witness a skirmish between the United States and Freeport over who pays security costs for nuclear-radiation screening of containers bound for the United States.

Brazil and Cuba agreed in 2009 to develop the port of Mariel, west of Havana, through a partnership between Brazil’s Grupo Odebrecht and a state-owned Cuban company, with PSA International of Singapore as operator. The port has been dredged to a comfortable 18 metres and was inaugurated in January. But a major transshipment role is blocked by the American trade embargo: ships which have been to Cuba are barred for six months from American ports. More time to complete the Panama expansion means more time for the embargo to lift.

Kingston in Jamaica is a long-established hub, but it has the most work to do to catch up with its rivals. Almost eight years after Panama’s president formally launched the canal project, Jamaica has not finalised its dredging proposal to increase the draft at its port. Environmental approval is expected by mid-year, but the finances are complicated by port privatisation, which is expected by September.

Another contender isn’t even under construction yet. China Harbour Engineering Company, which has its western-hemisphere headquarters in Jamaica, has a framework agreement for building a new port on the uninhabited Goat Islands, around 30km west of Kingston. This would link to a “global logistics hub,” with container storage and a fast overland route to a revamped second-world-war airport at Vernamfield, 55km west of Kingston. Environmental concerns are a big obstacle, however: the Goat Islands and their surrounding waters are a protected area. A proposed coal-fired power station does not endear the project to environmentalists. That might cause a few delays of its own.

Update: This post has been updated to reflect news of a preliminary accord between the Panama Canal Authority and the construction consortium.