Western Railroad Discussion > Panama Canal Update

Recent e-mail I received - sounds like tough times ahead for the Ports of LA/LB.


By Chris Kraul, LA Times
June 1, 2009


Reporting from Panama City -- The economic downturn has stalled big construction projects across the globe, but here in Panama, smoke-belching steam shovels and dredges work around the clock on what people here call simply la ampliación, or the expansion.

This month, officials will award the principal contract for the $5.25-billion expansion of the landmark Panama Canal, a project that will probably alter global shipping patterns and cement this Central American nation's place as a center of global logistics.

"This is a financial crisis, and there has been a decline in ship traffic. But we are very much on time and on target," said Panama Canal Authority head Alberto Aleman, addressing rumors that the global recession could cause the project to miss its 2014 scheduled completion date.

The authority is on the verge of choosing among three international consortia, including one led by San Francisco-based Bechtel Corp., to build two sets of locks to accommodate massive container cargo ships. Dubbed post-Panamax, the super-sized vessels are capable of carrying three times more cargo than ships now transiting the canal.

The construction of the two locks -- one at the waterway's Caribbean entrance, the other on the Pacific -- will cost $3 billion or more, take five years to complete and require an army of 5,000 construction workers.

The winning consortium is expected to use the contract's marquee value as one of the world's highest profile construction endeavors as a calling card to bid on other major infrastructure projects around the globe.

The canal authority maintains that the expanded canal will make Panama an even more important transit hub by attracting a bigger share of Asian container freight destined for the eastern United States . Currently, 70% of that cargo is offloaded at Los Angeles , Long Beach and other North American ports and moved by rail or truck across the country. Nearly half a million jobs in Southern California depend on international trade.

"There will be a migration of freight to the canal, the implication being that Los Angeles and Long Beach ports will take the hit," said Mark Page of Drewry Shipping Consultants Ltd. in London. "The U.S. rail lines will also suffer."

Despite the recession gripping the United States and other destination countries, the 9% drop in global container traffic forecast for 2009 and a financing scheme that assumes rising traffic and tolls, Panama's Aleman said the expansion project was moving forward and would not be deterred.

"We factored in a margin of error, and we are ahead of the projections," he said.

A new four-mile access channel on the Pacific side is 85% excavated, and dredging is underway. The new segment will be much deeper than the existing canal, enabling passage of quarter-mile-long ships carrying 14,000 cargo containers, compared with maximum 4,500-container ships that now transit the 50-mile waterway.

The winning contractor will be awarded a $50-million bonus if the expansion is done by 2014, the 100th anniversary of the Panama Canal's completion by the U.S. Army Corps of Engineers.

The canal expansion project is already having a ripple effect in Southern California. The Los Angeles and Long Beach ports each have launched expansion and streamlining projects valued at hundreds of millions of dollars to improve their competitiveness with an expanded Panama Canal.

"We're using the down time to improve our infrastructure," said Los Angeles port marketing director Mike DiBernardo, referring to his facility's 16% decline in container traffic over the first three months of 2009. The port's plans include the expansion of three terminals and improved wharf access for Union Pacific and Burlington Northern Santa Fe rail lines.

Long Beach port spokesman Art Wong said his facility had put in motion a 10-year plan to invest $1.6 billion in upgrades of piers and rail access, a response he attributes partly to the tougher competition the port expects from the Panama Canal, as well as from port projects in Mexico and Canada.

But global shipping companies are wary of the rising tolls the canal is charging to fund the expansion. The average toll will be doubled over a 20-year period that began in 2006. Michael Kristiansen, Latin America operations chief for Danish shipping giant Maersk, said the expanded canal would divert some U.S. freight away from U.S. West Coast ports, but how much will depend on transit times and the effect of the canal's toll hikes.

Another factor is whether U.S. ports on the Eastern Seaboard make changes to accommodate the biggest ships. Ports including ones in Savannah, Ga.; Charleston, S.C.; and Miami are too shallow, and access to the Newark, N.J., port -- the most important in the New York area -- is blocked by the Bayonne Bridge.

As a defensive measure, Maersk and other shipping lines serving the Asia-to-eastern-U.S. routes are taking a close look at westward routes through the Suez Canal in Egypt. Although Maersk is not yet diverting traffic from Panama, it plans to open a Suez route for post-Panamax ships in the near future, Kristiansen said.

In addition to the Bechtel-led consortium that includes Japanese partners Taisei Corp. and Mitsubishi Corp., two other groups placed bids in March for the contract. They include teams led by Grupo ACS of Spain and another led by Sacyr Vallehermoso of Spain and Impregilo of Italy.

The locks will employ a "water-saving basin," letting 60% of the water used to fill them to be recycled. Canals in Germany use the system, said Jorge de la Guardia, the canal authority's locks project manager.

He said the project so far had not experienced serious setbacks such as those faced by original canal builders. In the early 1900s, malaria and yellow fever killed thousands, and there were difficulties digging through highly unstable "cockroach shale," which kept sliding into the excavations.

Still, rumors that the canal project might face delays gained momentum when the authority extended the deadline for proposals to March from December and when a fourth bidder, a French-Brazilian consortium, dropped out of the bidding.

"You have to look at the long term," said Aleman of the canal authority. "Yes, we're in a financial crisis, but there have been others in the past. And Panama still has the best route for Asian traffic."

Steam shovels belching smoke? Did they find some of the 1914 equipment in storage somewhere?

I guess I should have said it sounds like tough times ahead for ALL of the ports on the West Coast, not just LA/LB.

My wife and I took a cruise through the Panama Canal last March and even then there was a lot of work going on, mostly for the approaches to the new locks to be built. About 40 ships a day cross the canal in each direction, mostly of the Panamax size, which fit with less than a foot clearnace on either side. Most that we saw were container ships, but a few were cargo ships probably loaded with grain. Ships 106ft wide and 970ft long can use the existing locks. The new locks will allow ships 160ft wide and 1,200 ft long to use the canal. This will allow most of the container ships now afloat to pass through, although at a hefty fare. Our Panamax sized cruise ship paid approximately $320,000 to pass through. A typical toll for a container ship would be about $160,000. The larger ships will pay much more than that. One interesting note is that to travel from the Pacific ocean to the Atlantic ocean, a ship actually sails from east to west.

To make this relevant to a train discussion forum, the Panama Railroad follows the canal for half of it's route. We saw several freight trains, most loaded only with containers, and two passenger trains during our movement through the canal.

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Fred Frailly has a piece in the July '09 Trains Magazine that paints a very bleak picture for the future of container traffic at the ports of LA and Long Beach. He say the traffic levels of 2007 will never return; recession or no recession. The increased size of the Panama Canal is but one of many reasons the make LA and Long Beach not competitive.

Don Bowen
Saint Helena, CA



Edited 1 time(s). Last edit at 06/08/09 10:29 by dlbowen.

There had been stories of a water shortage or major change in the water balance with the larger locks. Perhaps having to pump water for re-use instead of just using gravity. Since they are moving ahead I guess it's a non-issue?

TCnR Wrote:
-------------------------------------------------------
> There had been stories of a water shortage or
> major change in the water balance with the larger
> locks. Perhaps having to pump water for re-use
> instead of just using gravity. Since they are
> moving ahead I guess it's a non-issue?

Currently it takes 56 million gallons of fresh water to lift and lower a single ship 85 feet through the entire length of the canal. There are no pumps, all water movement is gravity fed. The Gatun Lake, a man made lake built to supply the canal, is more than adequate for this. Panama sees a lot of rain, and the lake is quite large, so there is plenty of water. The new locks are another story. They would quickly drain the lake if the traffic volume is as busy for the larger ships as the current size ships. Water storage basins along the new locks will recycle 60% of water used through the new locks. These will result in a 7% drop in water consumption compared to the older locks. As insurance against water shortages, new resevoirs are also being built to add water capacity.

In the attached photo you can see a couple of container ships ahead of our ship. You can also see the only place a train can move from North America to South America - the swing bridges seen on both side of the photo have a single track on them, as well as two lanes of roadway.

Rick



Edited 1 time(s). Last edit at 06/08/09 11:08 by swsf.

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So will the Panama Canal expansion kill off the proposed new port in Mexico as well?

Here is an address for a live camera of the Panama Canel area.

http://www.pancanal.com/eng/photo/camera-java.html


Ron

These new post-Panamax container ships will be enormous. Longer than the Nimitz / Reagan carriers, which are about 1,100 feet .

They're causing a lot of concern on the US east coast, since several ports have dredging or bridge concerns.

Projects to streamline the Ports of L.A. and Long Beach to make them more competitive become more urgent. Like a new on-dock railyard for TraPac (TransPacific) Container Terminal (Mitsui OSK and MOL). Their containers that you see on intermodal trains were trucked to UP's Dolores ICTF or BNSF's Hobart Yard. BNSF wants their equivalent to UP's ICTF, the Southern California International Gateway (SCIG), so that containers don't have to be drayed to Hobart. Note how many eastbound BNSF trains have marine containers mixed with domestic containers and trailers- those were all drayed to Hobart. The SCIG will please the public by taking trucks off the crowded freeways.

Another project is the Southern California Logistics Airport (was George Air Force Base) north of Victorville. If they can get a rail shuttle from the ports to SCLA, 40' marine containers could get repacked into 53' domestic trailers and containers and save on transportation costs to eastern U.S. points. A rail shuttle would cut down on freeway truck traffic. More detail in this excerpt below from this post <http://www.trainorders.com/discussion/read.php?1,1446821,1446826#msg-1446826&gt;

mapboy


"Date: 07/12/07 15:46
Re: SOCAL Inland Railport
Author: BruceDGillings"

"1) Will it happen [in Antelope Valley in L.A. County]? Highly unlikely, as what they are talking about requires billions and billions in infrastructure investment. More likely fon an inland port is the version, with mostly private capital, occurring at SCLA/Victorville, where BNSF has committed (I think???) to a new ramp. But BNSF is resistent to shuttle trains and said at ICON held at the ports several weeks back "don't count on it". It would take a huge commitment to acquire land, design all the necessary infrastructure, build the buildings, find users, etc. All you need is a bunch of developers to build and then have no one show up and you have a major fiasco."

"2) Rationale: in fact, it makes a lot of sense to create an inland port and use shuttle trains - with a big qualification on what "makes a lot of sense" means. Background: A certain percentage of boxes - 40 footers - are shipped directly to inland areas (ie: Chicago, Dallas, etc), but also a large number are trucked to Inland Empire DCs (Ontario, Chino, etc) to be repacked & combined with various other goods in 53' trailers and containers, then driven to Hobart, San Berdoo, COI or East Yard to get on a train. The proposal is to take 40' boxes directly off a ship onto a shuttle train, next to the dock, then to the inland port, then to a dc within a very short drive. Saves on a truck trip from the port to a dc. While the railroads don't want these short hauls, with public investment in a route (ie: the Alameda Corridor to the SP/UP/Metrolink Saugus line over the hill) so it is 2/3 main tracks, plus the ports/MTA/other governments pushing it (and that probably means subsidizing the service) it operationally makes sense. The financial depends on if you like subsidizing operations, or if the shear density of the service (could be upwards of 50 shuttle stack trains/day each way if all the rosy predictions on growth pan out)make if feasible. The end result would be a large decrease in the projected GROWTH of regional truck traffic. The same concept has been looked at between the ports and the Inland Empire: I believe Dan Smith with Tioga??? and Rob L (Rob?) on the board here have done some of those studies. Dan has been looking at sites. Again, the finances rely on subsidies for operations and capacity increases. Bigger problem is finding the land for the shuttle terminals - it ain't there and what little there is is mucho expensive."

"Prediction: more congestion: no one wants to pay for this type of stuff, even if it makes more sense (again, "sense" depends on your point of view). Viva la gridlock!"

Maybe this is a silly question - but why can't 53 foot containers go onto the container ships?

That would simplify the whole process, from the Chinese loading dock to the back door of Walmart, Home Depot, etc.

Completing a Great Depression Dream: From: Popular Science, September 1940

Note: Excavation for the third set of locks was halted midway through World War II.

http://www.czbrats.com/Articles/3rdlocks/3rdlocks.htm



Edited 1 time(s). Last edit at 06/08/09 19:13 by TrackOne.

Lackawanna484 Wrote:
-------------------------------------------------------
> Maybe this is a silly question - but why can't 53
> foot containers go onto the container ships?
>
> That would simplify the whole process, from the
> Chinese loading dock to the back door of Walmart,
> Home Depot, etc.


The existing 53' containers used for domestic transportation only do not meet the strength requirements for overseas shipping. They are lighter in weight. An equivalent 53' container for overseas shipping would add several hundred pounds of weight, which would then be subtracted from cargo caring capacity.

Also, 45' seagoing containers were tried a number of years ago but there were just too many logistical problems with them.



Edited 1 time(s). Last edit at 06/08/09 16:44 by jst3751.

jst3751 Wrote:
-------------------------------------------------------
> Lackawanna484 Wrote:
> --------------------------------------------------
> -----
> > Maybe this is a silly question - but why can't
> 53
> > foot containers go onto the container ships?
> >
> > That would simplify the whole process, from the
> > Chinese loading dock to the back door of
> Walmart,
> > Home Depot, etc.
>
>
> The existing 53' containers used for domestic
> transportation only do not meet the strength
> requirements for overseas shipping. They are
> lighter in weight. An equivalent 53' container for
> overseas shipping would add several hundred pounds
> of weight, which would then be subtracted from
> cargo caring capacity.
>
> Also, 45' seagoing containers were tried a number
> of years ago but there were just too many
> logistical problems with them.

Thanks.

I figured if there was an easy solution, they would have done it already.

APL is implementing a limited amount of 53' boxes on their ships. I don't know whether they are reconfiguring their container cells or just putting them on the top layer. In any case they are getting a premium price. These are not brand-new empties coming to the US, but rather revenue moves. There was a splash in the logistics media right about 6 months ago. In the mean time the East Coast ports will have to find money for new cranes and dredging.

Popular Science was around in 1040?? Getting back to the canal, at some point this
is all silly such as when domestic demand and labor in the Far East get to the point
where transportation becomes an issue and local manufacturing resurfaces. I don't
think we're all that far away from that right now and at point LA and Long Beach do
become almost redundant.

SOO6617 Wrote:
-------------------------------------------------------
> APL is implementing a limited amount of 53' boxes
> on their ships. I don't know whether they are
> reconfiguring their container cells or just
> putting them on the top layer. In any case they
> are getting a premium price. These are not
> brand-new empties coming to the US, but rather
> revenue moves. There was a splash in the logistics
> media right about 6 months ago. In the mean time
> the East Coast ports will have to find money for
> new cranes and dredging.

Thanks for that update, too.

Port Newark and Elizabeth NJ is in very difficult situation with the post-Panamax ships. The Bayonne bridge is in the way, and the channel is lined with two miles of solid rock. The pols are still fighting over what to do about the bridge...

jst3751 Wrote:
-------------------------------------------------------
> Lackawanna484 Wrote:
> --------------------------------------------------
> -----
> > Maybe this is a silly question - but why can't
> 53
> > foot containers go onto the container ships?
> >
> > That would simplify the whole process, from the
> > Chinese loading dock to the back door of
> Walmart,
> > Home Depot, etc.
>
>
> The existing 53' containers used for domestic
> transportation only do not meet the strength
> requirements for overseas shipping. They are
> lighter in weight. An equivalent 53' container for
> overseas shipping would add several hundred pounds
> of weight, which would then be subtracted from
> cargo caring capacity.
>
> Also, 45' seagoing containers were tried a number
> of years ago but there were just too many
> logistical problems with them.

The number 1 reason is that many foreign countries do not have the wide roads and space to handle 53 ft trailers. The standard size for international containers was set for 20 ft 40 ft and 45ft containers so that port facilities and ship operations could follow this standard. There are many 45ft containers in internationl service all over the world.
As posted, one or two steamship lines are trying a few 53ft containers in certain lanes, but very limited service.

gmojim

Riding the Panama Canal Railway F40PH 1862 on April 24, 2007 - busy operation. I wonder how traffic will be come 2015?

1862 next to former military commissary at Albrook, Panama. Cruise ships book the trains for trips. Princess Cruise chartered the train on April 24, 2007.



Edited 1 time(s). Last edit at 06/08/09 19:27 by cozephyr.

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