Charleston has its port deepening. Panama has its canal expansion.
Two big maritime projects, both with major economic consequences.
Drawing parallels to the planned Charleston Harbor deepening, a top Panama Canal official said an expansion of the Central American waterway was a do-or-die decision for his country.
“There was a trend of the deployment of bigger ships that would not fit through the Panama Canal,” Manuel Benitez, deputy administrator of the Panama Canal Authority, said Tuesday.
“So we had to make a decision — either we were going to invest in our future and expand the Panama Canal and continue to be a world player in the maritime industry, or stay with the existing canal and slowly lose our position as a maritime commerce leader,” he said during the S.C. International Trade Conference on the Isle of Palms. “So we decided to bet on the future and expand the Panama Canal.”
That expansion, a $5.25 billion project expected to be finished by the spring, will lead to an increase in bigger containerships carrying up to 13,000 20-foot cargo boxes traversing the canal and visiting East Coast ports. The Port of Charleston and many of its competitors are deepening harbors to accommodate those ships, with Charleston expecting ships mainly in the 9,500-container range.
While the canal expansion is expected to exponentially boost East Coast cargo traffic, it also has been a boon to Panama, where a national referendum was held in 2006 to authorize the expansion.
At the time, Panama’s gross domestic product was $15 billion and the expansion accounted for more than one-third of that annual amount. Today, the country’s gross domestic product has increased to roughly $50 billion while unemployment is 4 percent and inflation is dropping below 2.6 percent.
“We were successful in convincing the Panamanian people that we had to make this investment in this infrastructure to stay in business,” Benitez said. “That has paid off.”
Currently, the largest ship that can pass through the canal carries about 5,100 cargo boxes. After expansion, ships carrying up to 13,200 cargo boxes will be able to make the passage. That is expected to further the trend of Asian shippers diverting cargo from the West Coast to East Coast ports because it will be cheaper to travel to Southeast markets by water than by rail.
While there have been several delays — the canal was supposed to be expanded in time for its 100 birthday last year — Benitez said he is confident it will be operational by April. The latest construction problem involves a crack that developed on one of the Pacific Ocean-side locks. Contractors are working on a plan to repair the crack.
“We were assured by the contractor that this is repairable,” Benitez said. “The good news is that we discovered this during the testing of the locks procedure.”
While there is room for another expansion that would accommodate the biggest ships made today — carrying roughly 20,000 cargo boxes — Benitez said it is not economically feasible to move ahead until many more of those mega-ships are in use. It is estimated that by 2018, just 3.2 percent of the world’s containership fleet will be too large to traverse the canal.
“In terms of numbers, it doesn’t make sense to build a canal that will have the capacity to handle the world’s fleet,” he said.
A China-funded initiative to build a canal in Nicaragua to handle such massive ships isn’t yet seen as competition, Benitez said, because there are doubts it will ever be built.
“I wouldn’t say it’s impossible, but it doesn’t make economic sense,” he said
Benitez estimated that the proposed Nicaraguan canal would be more than three times longer than the Panama Canal, 10 times more expensive and require dredging and excavation of nearly 10 times more dirt than the Panama project that was started more than 130 years ago.
“We are keeping a close look at that project, though, because if it ever gets built that’s when it will be competition,” he said.
As the State Ports Authority embarks on its Charleston Harbor deepening project — the Army Corps of Engineers gave its final regulatory approval Monday — Jim Newsome, the SPA’s chief executive, sought advice from Benitez on getting buy-in on such large civil works projects from the public.
Benitez said the canal expansion obtained 77 percent approval during that country’s recent referendum, but only after an intensive education campaign.
“We had to talk to the people and explain to them what it meant for them,” Benitez said. “We made a road show covering the entire provinces of Panama in small towns for (residents) to be able to understand that this was a project for the people that allowed Panama to continue to serve world commerce. But most important, it was beneficial to the people.”
Reach David Wren at 937-5550 or on Twitter at @David_Wren_