By Owen Braley and William P. Doyle
On June 26, 2017, Panama celebrated the one-year anniversary of the opening of the expanded Panama Canal. On the inaugural day, the first post-Panamax vessel to transit the expanded canal was the 9,400-plus TEU containership COSCO Shipping Panama. That vessel carried nearly twice the amount of containers of a vessel able to transit the original canal. The total cost of the expansion is said to be $5.8 billion.
According to the Panama Canal Authority (ACP), more than 1,500 neo-Panamax vessels have transited the expanded canal. More than half of the containerships are 13,000-plus TEU vessels - neo-Panamax ships. These ships are coming from Asia to the U.S. East and Gulf Coasts. Prior to the expansion, the old locks could only fit containerships up to approximately 5,000 TEUs.
In addition to much larger containerships transiting the expanded Panama Canal, energy carriers are now able to make the transit. Prior to the expansion only a fraction of LNG carriers were small enough to transit the canal, and none of the carriers actually used the canal. Now, more than 90 percent of the global liquefied natural gas (LNG) fleet can transit the expanded Panama Canal opening a new Asian market and trade route for natural gas produced in the United States. In fact, on average 5.2 LNG vessels transit the Canal weekly, far exceeding the Panama Canal Authority’s forecast calling for one LNG carrier transit per week. Liquefied petroleum gas (LPG) traffic has also significantly increased post-expansion, accounting for 31.5 percent of all transiting vessels in the expanded canal.
Despite lackluster projections by some liner experts, the expanded canal is humming along faster and more efficiently than many had predicted. Since opening, the Panama Canal has attracted 15 new liner services and averages about six neo-Panamax daily transits as opposed to projections of two to three transits per day in the first year of operation. There is now hard evidence that cargo from Asia began shifting to the U.S. East Coast in the second half of 2016. And, according to PIERS Data, the Asia to the U.S. East Coast trade through Panama has increased 6 percent year over year in 2017 (January 2017-May 2017). Incredibly, containerized cargo from Asia to the U.S. Gulf Coast has jumped 34 percent.
Let’s take a look at some of the volume gains to ports on the U.S. East Coast:
In June 2017, the Georgia Ports Authority (GPA) and the Virginia Port Authority (VPA) both reported more than 10 percent year-over-year volume growth for the month of May. The South Carolina Ports Authority reported a 9.4 percent volume increase between July 2016 and May 2017 over the previous year. Jacksonville Port Authority said it had seen a 13 percent growth in Asian container shipments from October 1, 2016 to the end of March 2017, compared with the same period of the previous year.
There are many infrastructure projects in the U.S. that are in motion as a result of the expanded Panama Canal. The Canal allows larger ships to transit, therefore, ports must be ready and capable of receiving vessels 2 .5 times larger than the ships that had transited the Canal over the past 100 years. New and planned infrastructure projects include raising bridges such as the Bayonne Bridge, port-rail projects serving Gulf Coast ports and dredging.
President Donald Trump’s proposed budget for fiscal 2018 proposes $108 million dollars for harbor deepening projects. On May 24, 2017, the U.S. Army Corps of Engineers (USACE) released its Army Civil Works Program, FY 2017 Construction Work Plan. In its work plan are several harbor improvement projects that include tens-of-millions of dollars in funding for dredging. In addition to USACE funding, state and local government authorities are pitching in millions of dollars to help deepen harbor channels. Dredging is one of the most critical components that will enable growth for many ports on the U.S. East and Gulf Coasts.
The ports of New York & New Jersey, Baltimore, Virginia and Miami are the gateways on the East Coast that can currently handle the largest ships coming to the U.S. as their navigation channels are dredged to 50 feet.
Below we take a look at some of the dredging projects in the hopper.
Boston – In its 2017 Work Plan, USACE allocated $18.2 million to begin deepening Boston’s 40-foot-deep channel to 45 feet. Construction is expected to begin in the fall of 2017 with dredging to commence in the spring of 2018. President Trump’s proposed budget allocates $58 million in funding for its harbor deepening project. In addition, two 50-foot-deep berths will be dredged. This will allow Boston’s Conley Terminal, the lone container terminal in the port, to accept fully laden neo-Panamax ships. Massachusetts has already committed $130 million in funding for the estimated $350 million total cost.
Philadelphia – USACE’s 2017 Work Plan approved $29.5 million to complete the deepening of the Delaware River channel to 45 feet. This allocation is in addition to $30 million approved by Congress earlier in May. Pennsylvania is allocating $300 million to modernize and upgrade PhilaPort and some of the funding will be used for dredging. The Delaware River dredging project is expected to be completed by the end of 2017, covers 103 miles, and costs $392 million.
Charleston – The Charleston Harbor Deepening Project, which aims to deepen the Charleston Harbor to 52 feet, will begin construction this fall. In the FY 2017 Budget, Charleston is named as a “new start” construction project. USACE is providing $17.5 million in funding. In addition, Charleston received $16.1 million for the routine maintenance and dredging required to begin construction. With over $300 million set aside by South Carolina in state funding, officials are hopeful that the harbor will be fully functional at its new depth of 52 feet, making it the deepest port on the U.S. East Coast, by 2020. In its current state, the Port of Charleston can only accept less than fully laden post-Panamax vessels, however, after the deepening, the port will be able to receive neo-Panamax size container vessels.
Savannah – Savannah is in the process of deepening its channel from 42 to 47 feet. The project is more than 60 percent complete and is looking for more funding sources. President Trump’s proposed budget allocates $50 million in funding for dredging. The project is scheduled to receive about $50 million from the budget which falls well short of the reported $80-$100 million it would take to keep the project on schedule.
Jacksonville – In their June 2017 meeting the JAXPORT Board of Directors unanimously voted to approve the project to deepen the St. Johns River shipping channel from 40 to 47 feet. The project, which covers 11 miles and will cost an estimated $484 million is scheduled to begin construction by early 2018 with project completion taking between five and six years. The deepening will be funded mostly through state funds, but has received $21.5 million in federal funding.
Port Everglades – USACE has allocated $2.8 million in its 2017 Work Plan for engineering and design work to eventually deepen its channel from 42 feet to 48 feet and also widen the channel so that cargo ships and docked cruise ships can coexist and share the waterway. The port has also purchased three super post-Panamax cranes, in anticipation of larger ships calling the port.
Tampa Bay – The Port of Tampa Bay plans to deepen the Big Bend Channel from 34 feet to 43 feet and widen it from 200 to 250 feet. The port recently obtained $9 million in funding from USACE to help fund the $55 million project.
Sabine-Neches Waterway – The Sabine-Neches Waterway intends to dredge from their current depth of 40 feet to 48 feet. USACE has committed $557,000 for the planning stage of deepening and widening of the waterway.
Houston – The Bayport Channel in the Port of Houston has been accepted by the USACE and will be maintained at a depth of 48.5 feet. Port Houston announced completion of maintenance dredging on June 29, 2017.
Quicker than many anticipated, the effects of the expanded Panama Canal are impacting U.S. Gulf and East Coast ports with increased trade and significantly larger container vessels while domestic energy producers are seizing the opportunity to export natural gas competitively to Asia. The expanded canal is putting pressure to speed up key U.S. waterside infrastructure improvements to accommodate for the larger ships making the Canal transit. An important component is ensuring adequate water depths to allow for larger vessels to safely berth and discharge cargoes. As seen above, the ports that do not yet have the required navigational depths are working hard to secure the necessary funds to remain competitive.
Owen Braley is a summer student volunteer in the Office of FMC Commissioner William P. Doyle. Braley is entering his junior year, a Second Class Cadet, at the Massachusetts Maritime Academy, majoring in International Maritime Business (IMB). He recently returned from a semester abroad at the Dalian Maritime University in Dalian, China.
William P. Doyle is a Commissioner with the U.S. Federal Maritime Commission. The FMC, among other things, regulates liner companies, ocean transportation intermediaries and marine terminal operators. The thoughts and comments he expresses here are his own and should not be construed to represent the position of the Commission or his fellow Commissioners.