Panama Canal expansion could give a boost to South Florida ports

Sunday, October 14 2007 @ 11:37 AM UTC

Contributed by: Don Winner

A Ship In The Miraflores Locks
A Ship In The Miraflores Locks
Stories by Doreen Hemlock for the Sun Sentinel Staff writer Photos by Carey Wagner, Staff photographer - PANAMA CITY, Panama - Nearly a century after the Panama Canal revolutionized world trade, a massive expansion of the engineering marvel is poised to upend global commerce again, possibly bringing a windfall to South Florida. This small Central American nation is investing more than $5 billion to double capacity at its water highway for mega-freighters that can't fit. The seven-year expansion will ease all water travel for the fast-rising flow of Asian products to U.S. consumers on the Atlantic coast. U.S. East Coast seaports, now the biggest canal users, are poised to receive tens of billions of dollars more in Asian freight yearly and thousands more jobs, as a smaller share of Asian cargo moves cross-country by rail or truck from California and the Pacific, port analysts say. The canal expects to roughly double the volume of Asian cargo bound for the U.S. East Coast by 2020 to 83 million tons. (more)

Now, the race is on to see which U.S. seaports will gain the most from the extra cargo shipped through Panama. All may grow as trade booms. But a larger share is likely for those ports with deeper channels for bigger vessels and those most efficient to distribute cargo.

Both the Port of Miami and Broward County's Port Everglades are seeking hundreds of millions of dollars each, some from federal and state funds, to deepen their channels. Savannah, Ga., Charleston, S.C., New York and others also are busy on dredging projects.

"We need to seize the opportunity from the Panama Canal doubling," said Port Everglades director Phil Allen, who backs a roughly $400 million expansion that includes dredging the channel from 45 feet to 49 feet.

The stakes are high, because ports are serious business. Port Everglades alone accounted for 11,000 direct jobs in South Florida and nearly $17 billion in economic activity last year, according to Lancaster, Pa.-based port consultant Martin Associates. The Broward County port aims to triple cargo volumes in 20 years, including more goods shipped from Asia through Panama.

Some U.S. port leaders can hardly believe they're debating how to split up business soaring from this tropical nation of 3 million people.

When the United States handed over control of the 85-year-old canal on Dec. 31, 1999, many questioned whether the Central American republic could run operations efficiently. After all, Panama's former leader Manuel Noriega sat in a Miami jail convicted on drug charges.

The Panama Canal Authority including many executives who had worked with Americans for years at the waterway proved it could outperform its former U.S. management. Panamanian leadership has boosted use of the canal as well as profits.

Today, the channel handles roughly 4 percent of world trade and 11 percent of U.S. commerce. A record 300 million tons transited in the just-ended budget year, crossing mountains and rain forests between two oceans, the canal authority said.

Hulking freighters, some loaded with more than 4,000 containers, fit with wondrous precision in its bathtub-like locks. Water fills and drains from the locks so fast, raising and lowering ships by about a yard a minute, that passengers can feel the change in their stomachs, as if in an elevator.

But canal operations are nearing capacity, and mega-ships that don't fit are pursuing other options, including the Suez Canal in Egypt.

The Panamanian government asked voters last October to approve a canal expansion or risk losing the country's golden egg. Canal-related business generates 28 percent of Panama's economic output annually.

A majority voted to add a new lane to accommodate vessels up to 1,200 feet long, 160 feet wide and 50 feet deep. Each megaship as long as four football fields will be able to haul up to 12,000 containers, nearly three times as many as freighters can carry now.

Tolls from ships using the canal are to cover costs for the project, slated at $5.25 billion.

"If we didn't expand the canal, the economy would have suffered," said Jay Samudio, 22, a computer technician from Panama City, who voted for the venture. "The expansion will create jobs for lots of Panamanians."

Some of those new trade-related jobs might have been South Florida's not long ago.

Since Panama handed over management of key seaports to private companies in the 1990s, the country has transformed from a place to simply transit into a major cargo distribution center. Panama's booming seaports today handle more cargo containers than all South Florida ports combined, and they're growing faster. Freight at Panama seaports is set to double again by 2010.

Panama ports focus on plucking containers off ships from Asia or other world regions and reloading the boxes onto smaller vessels bound for South America, Central America and the Caribbean. Some ships also make their way to the United States.

"We're becoming to sea trade maybe what Miami is for airline passengers a hub to all over," said Rodolfo Sabonge, vice president of marketing analysis and research at the Panama Canal Authority.

South Florida used to count on importing goods for re-export for up to 25 percent of its port business. Now, it's less than 5 percent, port leaders said. U.S. ports lost out, largely because Washington's new security rules since Sept. 11, 2001, increased paperwork, costs and freight turnaround times. South Florida seaports now depend mainly on goods coming in or out, not trans-shipment.

That loss helps explain why the race is so fierce among U.S. East Coast seaports to capture more of the U.S.-bound cargo from the expanding canal. Seaports are hoping to dredge entryways to host larger ships if not the mega-vessels, which likely will make just two or three stops at U.S. Atlantic docks.

The Port of Miami is eager to deepen a 42-foot seaport channel in a project estimated to cost at least $180 million. "When the Panama Canal improvements come online, if we're not at 50 feet [depth], we're out of the game," port director Bill Johnson said.

Norfolk, in Virginia, has an early lead as a mega-ship stop because of its deep channel for U.S. aircraft carriers. Ocean freight entering Norfolk could then be sent through the area's well-developed rail and distribution network to the Midwest and other East Coast areas, including South Florida.

South Florida faces hurdles to lure the biggest ships and act as a U.S. distribution hub for at least two reasons. It is far from other U.S. population centers, sitting at the tip of the nation. And Florida has tended to be less generous than other states in funding seaports, said Richard Wainio, who runs the Port at Tampa, formerly ran the Port of Palm Beach and led strategic planning at the Panama Canal.

Wainio said South Florida ports might pool efforts, rather than compete, for limited cash to dredge deep and host new terminals. "And Everglades is the obvious choice [to deepen], because Miami is boxed in" on an island off downtown, he said.

Panama knows it will gain from a bigger canal, just as it did when the waterway opened in 1914. South Florida gains, said Port Everglades' Allen, "depend on us making improvements."

Doreen Hemlock can be reached at or 305-810-5009.

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