Panama Canal expansion to hurt intermodal?

[chicagorails]

....and china will be able to get their large russian made aircraft carriers thru then,also!!!

[vsmith]

....and china will be able to get their large russian made aircraft carriers thru then,also!!!

 

Your assuming that the "Rusty Ruskie" would actually make it all the way across the Pacific without breaking down....remember, theres a good reason why the Russians dumped those buckets.

 

PS one of them ended up as a floating school/amusement park attraction on a Chinese river.

[vsmith]

Now if there's virtually no traffic from the Pacific to Europe via the rail route, Why are they widening the canal to accomodate ships that are already *not* using the canal in favor of Suez or are already the right size to pass thru the canal?

They're widening the PC so that large ships coming from the Far East can go directly to Gulf or East Coast ports or large ships from Europe can go directly to the West Coast.

Hmmmm...Methinks the Pentagon may be a bigger pusher here than international commerce. Wonder what they have on the drawing board.  I've heard rumors of aircraft carrier sized multi-ship mobile command bases in the study phase. Basicly a complete seaborne military air base that can be sent to trouble zones, anchored offshore, and interlinked via companionways and used to house air and land based forces without necessitating land-based military installations that can become focal points for anti-american attacks from insergents and terrorists and bypassing tricky negotiations for such land based installations. A wider canal would make moving such a system around the world much easier...

I think any terrorist threat to the PC is overrated.  The ones we're concerned with are more interested in killing Americans in America, not holding up commerce in a distant place.  I'm sure the Pentagon is pretty confident of handling the security of the PC.  In addition, a third set of locks acts as added insurance.  Terrorists would have to knock out all three sets.  Sinking a ship in a narrow part of the canal would only impede traffic for a while.  In any case, they could do that now.  Also, part of Panama's plan is to widen the channel.

 

The Mobile Command Bases wouldnt be anchored off Panama, they would be stationed off any overseas trouble spots like near Iraq, Afganistan , Iran  or whereever. The idea being that they could be sent and established far quicker than having to either build a new air base or revise and existing airbase. The base would not be in the territorial waters of any nation so the whole issue of "occupation" is skirted. The idea being that they could steam their way to any trouble spot in any ocean around the world via either the Suez or Panama canals. Given that 80-90% of the trouble spot in the last 10 years have all been within carrier strike range it would logical that the offshore bases could supply any necessary air support either militarily or logisticly without having all the troubles the armed forces have been having with creating large military bases in nations who's populace is not always happy to see us living amongst their populations in large numbers.Anyway its all just digital tics on a computer disk right now...to expensive...$10 B

 

edit HERES the link! there planned to called MOB - Mobile Offshore Bases:

http://www.prism-magazine.org/dec01/giants.cfm

[modorney]

I worked (for a shipping company) on a Panama proposal about a decade ago.  The canal toll worked out to about 25 bucks a (40 foot) can.  As mentioned, the canal is limited by water (the locks are gravity locks, and the rainforest water is used once, and dumped in the ocean).  And, as noted, the soil is poor, and the canal silts up quickly, requiring constant dredging. 

The railroad we proposed was similar to the KCS operation today.  Semi-automated cranes would pick off the cans and drop them on trains, rolling the train back and forth to align the empty car with the crane.  Once filled, the train would head to the opposite shore, and the process would be repeated, filling the ships.  Our proposal considered 16,000 teu Malaccamax ships, and it would cost 3 bucks a can to transport. 

Getting the project up and running was less than 100 million, but the full-up, 24 cranes, 8 ships simultaneous, triple track development was about a billion bucks. 

We had to keep it under a billion, because that's what it would cost to build a sea-level canal in Nicaragua. 

[Anonymous]

Dont worry about the carriers. We have LOTS of those. No one does em like we do and there is little oppertunity for Soviet era satuation strikes against them. I dont think our carriers are able to use the Canal but one thing they do have is stamina at very high speeds. I think they are capable of almost 1000 miles displacement every 24 hours. That is a huge amount of ocean.

But they can't be used against an enemy like China that wages economic warfare.

The US trade deficit in August was $70 billion, $22 billion of that was with China.

Sir, Our Carriers along with everything else in our Armed Forces represent the Nation both in Peace and in War. China is currently a friend, however she has made no secret of her ambition to dominate her area in this world and has made advances in many areas including Military Forces as she watches and learns from our way of war fighting. She is also a Nation that thinks in 50-100 year terms ahead. Not 4 years like we do.

If there is ever a war the Deficit will be the least of our worries. It will be ignored as we mobilize and ration the USA for the war effort.

Sir, I fear we WILL need the Canal to get our carriers quickly from one fleet to the other because someday we will have to fight and China does have the power if not the hardware to destroy them at sea.

If I was a foreign power intent on strategic strikes, that Canal will be right up there along with Leesburg VA (FAA), Telecommunications in 4 places, One Gulf Petro and Alaska Petro locations, Bailey Yard in the west and several other locations that are VITAL to our Nation. No two bit terrorist will have these resources like a nation state will.

Like it or not, the Canal along with our Railroads all particpate in the world economy and as much as we can maximize the design limits and introduce any upgrades to better serve shipping is a step ahead.

[Datafever]

We had to keep it under a billion, because that's what it would cost to build a sea-level canal in Nicaragua. 

If a sea level canal would only cost $1B, why is Panama going to spend $5B+ to expand the existing canal?

[jeaton]

We had to keep it under a billion, because that's what it would cost to build a sea-level canal in Nicaragua. 

If a sea level canal would only cost $1B, why is Panama going to spend $5B+ to expand the existing canal?

Panama should spend a $billion to build a canal in Nicaragua?  Anybody ask the Nicaraguans about that?

[Anonymous]

We had to keep it under a billion, because that's what it would cost to build a sea-level canal in Nicaragua. 

If a sea level canal would only cost $1B, why is Panama going to spend $5B+ to expand the existing canal?

Panama should spend a $billion to build a canal in Nicaragua?  Anybody ask the Nicaraguans about that?

So they can smuggle drugs out of town faster? Forget it.

[JSGreen]

Panama should spend a $billion to build a canal in Nicaragua?  Anybody ask the Nicaraguans about that?

Hey, the Panamanians could do what we did...ferment a revolution, then take over and build the canal.

I still like what Senator S.I. Hiakawa said during the debate about giving the canal back...
"It's our canal....we stole it fair and square"

[eastside]

We had to keep it under a billion, because that's what it would cost to build a sea-level canal in Nicaragua. 

If a sea level canal would only cost $1B, why is Panama going to spend $5B+ to expand the existing canal?

That must be an old estimate.

"Enrique Bolanos, Nicaragua's president, who backs the scheme [to build a canal across Nicaragua], says it would cost $18 billion and take 12 years to build" -- The Economist October 21, 2006.

[jeaton]

We had to keep it under a billion, because that's what it would cost to build a sea-level canal in Nicaragua. 

If a sea level canal would only cost $1B, why is Panama going to spend $5B+ to expand the existing canal?

That must be an old estimate.

"Enrique Bolanos, Nicaragua's president, who backs the scheme [to build a canal across Nicaragua], says it would cost $18 billion and take 12 years to build" -- The Economist October 21, 2006.

I assume that number includes "special" payments and the VAT.

[modorney]

> "Enrique Bolanos, Nicaragua's president, who backs the scheme [to build a canal across Nicaragua], says it would cost $18 billion and take 12 years to build" -- The Economist October 21, 2006.

>That must be an old estimate.

Yep, old estimate - I stand corrected.  We never had firm plans for the sea level canal, the 1 Bil number was tossed around as a limiting factor. 

http://www.nzherald.co.nz/section/story.cfm?c_id=2&objectid=10407500

Says 18 billion. 

Here's how we came up with a billion.  We had to move a few thousand cubic yards of dirt, mostly to build two "terminals" at each end.  And most of the dirt was moved less than a mile.  We planned on shipping in a few bulldozers, trucks, power shovels, etc., and abandoning them (or not bringing them home, possibly giving them to the locals).  So, we came up with a figure of 10 bucks a cubic yard for the cost of moving dirt.  (At the time, moving large amounts of dirt in the US cost about 3 bucks a yard).

We took that 20 bucks a yard figure, and did a rough guess of 150 miles of canal, 60 yards wide, and 60 yards deep (average).  Thats a hundred million cubic yards.  That's where the billion came from.  Sure, there's infrastructure - retaining walls, radios, lights, toll "booths", etc.,  but ???  I wonder what they plan on doing with the 18 billion?

[tatans]

There are 2 sets of Canals at each end, the plan is to build a third canal very much larger than the 2 existing canals(which are not very wide) The cost will probably be prohibitive and take decades to complete, AND who might pay for this ? Iceland?? Sudan?? Microsoft??  Talk is some one is thinking about a new canal through Nicaragua, How about a canal across the U.S. connecting New York to L.A. (Say hello to Canal 66)

[Datafever]

We took that 20 bucks a yard figure, and did a rough guess of 150 miles of canal, 60 yards wide, and 60 yards deep (average).  Thats a hundred million cubic yards.  That's where the billion came from.  Sure, there's infrastructure - retaining walls, radios, lights, toll "booths", etc.,  but ???  I wonder what they plan on doing with the 18 billion?

150 miles * 1760 yards per mile * 60 yards wide * 60 yards deep = 950,400,000 cubic yards or pretty darn close to 1 billion cubic yards.  At $10 a yard, that's $10 billion.  I can see spending $8 billion on infrastructure.

[modorney]

Thanks, datafever, for correcting my math!  Now, 18 bil makes sense.

[tnchpsk8]

would this cut into BNSF and UP's transcon intermodal franchise?  Would this have a chilling effect on capitol expenditures on infrastructure that the rr's are planning for in the next couple of years? 

I don't think so. They need the increased capacity regardless of what happens in Panama. Besides, who knows, maybe the Class 1s might look at returning to providing passenger service by the time the Panamanians get done reworking "our" canal.

[Anonymous]

Here's another article on both the Panama and Nicaraguan plans......

http://www.logisticstoday.com/displayStory.asp?nID=8283

The interesting tidbit here is that the Nicaraguan proposal is not meant as competition for the expanded Panama Canal, but rather a supplemental canal to handle the largest ships (those too large for the new Panama Canal).  But 26 hours via a Nicaraguan canal vs 62 hours via Cape Horn?  Is that much of a time savings?

[solzrules]

Both of these undertakings are going to be government managed projects - meaning mega cost overruns and lots of corruption (Nicaragua?!) 

The US rail industry is a private profit making machine.  I don't know that they will have much trouble competing with the canals IF they can beat the added time to go to through the canal by having the infrastructure in place to move trains fast. 

[erikem]

Here's another article on both the Panama and Nicaraguan plans......

http://www.logisticstoday.com/displayStory.asp?nID=8283

The interesting tidbit here is that the Nicaraguan proposal is not meant as competition for the expanded Panama Canal, but rather a supplemental canal to handle the largest ships (those too large for the new Panama Canal).  But 26 hours via a Nicaraguan canal vs 62 hours via Cape Horn?  Is that much of a time savings?

I think someone slipped a decimal point in calculating how much extra time it to to go around Cape Horn. Off the top of my head (and I might be off by 30% or more), the trip around the Horn involves another 7,000 miles or so of sailing - to do that in 36 hours implies the ship is traveling about 200 knots or so. Increase the time by 10 to 360 hours and the ship's speed drops to a more believable 20 knots.

The Nicaraguan canal would then be saving a couple of weeks each way for the largest ships and that would be wortha lot of money.

[rob_l]

Given that overall containerized imports from Asia to the USA have been growing about 10% per year and will surely grow at rates above 6% per year for the foreseeable future, there will be plenty of traffic to fully load up both the RRs and an expanded Panama Canal, despite the best efforts of Panama and the US RRs to expand capacities.

To me, the really interesting issue is how much capacity expansion is desirable in the various supply-chain channels, considering the underlying economics.

The primary market for the Canal is containerized imports from Asia entering the Continental US via the East Coast or Gulf ports. In 2005, about 25% of the total containerized imports (on a TEU basis) from Asia passing through US ports used an East Coast or Gulf Coast port of entry. Only a relatively small portion moved the Suez Canal, most of it came through the Panama Canal. From 2001 to 2005, the share of imports from Asia to the USA routed via East and Gulf Coast ports rose from 18.6% to 25%, but the Canal's growth in share slowed down in 2004 and 2005.

In 2005 about 56% used LA-Long Beach as their port of entry, and the rest (about 19%) used other West Coast ports. These figures do not include imports from Asia to the USA routed via Canadian ports or Mexican ports. (In 2003 LA-Long Beach handled 60% of all containerized imports from Asia to the USA.)

When assessing the economics of importing goods to be ultimately consumed in the Eastern half of the USA and Canada via West Coast ports or via East Coast ports, one has to consider both the transportation and inventory costs of the importer. The studies I have done have come to the following conclusions concerning goods that are distributed and consumed nation-wide:

For goods with declared values of less than about $13 per cubic foot, minimizing land transport and maximizing sea transport is most cost-effective. The marine box should be shipped direct from Asia to the USA regional distribution center using the nearest port. About 25% of total imports from Asia to the USA fall into this category.

For goods with declared values of more than about $28 per cubic foot, routing all US imports through LA-Long Beach, unloading the marine containers at a warehouse in the hinterland of the ports, then re-shipping to inland distirbution points only the currently-demanded quantities in domestic containers or trailers is most cost-effective. Imports in excess of current demands are held in a warehouse in the hinterland of the port of entry until demand materializes. Often times, the importer as far as this warehouse is a wholesaler, and the shippers from there to the regional distribution centers are its retailer customers. Another 25% of total imports (by volume) from Asia to the USA fall into this category. While transportation costs are higher under this strategy, the savings in inventory costs more than makes up for it. (Instead of deciding over in Asia one-to-two months ahead of time how much goes where, a match-up of supply and demand can be done 2-10 days ahead of time in LA.)

For the other 50% of imports consumed nation-wide with declared values between $13 per cubic foot and $28 per cubic foot, the most cost-effective strategies are intermediate to the above two strategies. These strategies involve selecting 3-6 ports of entry and practicing "consolidation-deconsolidation" at those ports. For example, suppose a retailer has 24 regional distribution centers and uses 4 ports of entry. Six RDCs would be assigned to each port; imports to a set of RDCs would be trans-loaded from marine containers to domestic containers or trailers in the hinterland of their designated port of entry. Imports in excess of current demands would be held at an import warehouse in the hinterland of the port of entry until demand for them materializes.

Wal-Mart is so large that a single RDC of theirs handles more volume than half a dozen RDCs of many other nation-wide firms. They can use many ports of entry and probably still enjoy reasonable economies of scale in managing their inventory costs for much of their product line. But even Wal-Mart will not import expensive items suchas digital cameras directly; they will buy them from the import wholesaler in LA, and have them shipped from LA to Wal-Mart RDCs as "domestic freight".

Note that the cheap imports move through the Canal, the expensive stuff doesn't.

Many importers do not operate nation-wide. They cannot practice the "consolidation-deconsolidation" strategies, they don't have a nation-wide market they can pool. Their market shares are declining compared to the nation-wide "big-box" retailers, but they still account for a significant share of total imports. There also are certain goods imported that are only consumed at a specific location, e.g., auto parts going to assembly plants in Ohio, Kentucky or Tennessee. All of these goods are direct-shipped in marine containers to final destination. Expensive stuff (above $40 per cu. ft.) going to Eastern points will not want to go through the Canal, while cheaper stuff will.

Of course, the ability for traffic to move in the most cost-efficient manner depends on channel capacities. Once a supply-chain channel becomes congested and the container transit times stretch out badly, it becomes an undesirable channel for the importer -- its inventory-related costs get out of control, it may miss sales entirely. This happened in 2004 in LA-Long Beach. As a result, a significant chunk of import traffic diverted up to Seattle-Tacoma and Oakland in 2005. But in 2006, that chunk moved back to LA-Long Beach, as the "Pier Pass" program expanded port capacity sufficiently to ease the congestion, and there were no melt-downs in Southern California in either 2005 or 2006.

While the Canal is very busy, I don't expect it to become a choke point for containerized imports for Asia just yet. There still is a lot of bulk shipping passing through the Canal, and the container lines can afford to price them out and force them to go the long way around.

ASSUMING the distribution of cheap stuff vs. moderate stuff vs. expensive stuff imported from Asia stays about the same as it is now, I think the cost-effective "natural" allocations of total imports to channels are more like 51% for LA-LB, 22% for the rest of the West Coast (including Mexican and Canadian ports), and 27% for the Gulf and East Coast ports. If Asian imports continue to grow at rates above 6% per year (which they surely will), before long that will require expansion of the Canal as well as further development of the Gulf and East Coast ports. And there still would be plenty of business to fill BNSF and UP out of Southern California up to whatever capacity they are able to build.

Best regards,

Rob L.

 

[JSGreen]

The studies I have done have come to the following conclusions concerning goods that are distributed and consumed nation-wide:

That seems to lay out, in a concise manner, all of the major elements involved.  Are those studies you referenced available to the public?  Might be some mighty interesting reading....

[rob_l]

You can download a PDF file of my 2005 study prepared for the Southern California Association of Governments from

•http://www.scag.ca.gov/goodsmove/pdf/FinalElasticityReport0905rev1105.pdf 

 

 

That one is a public study, you can pass it on.

 

 

Best regards,

 

Rob L.

[JSGreen]

Rob, thanks for the link.  A very interesting report.  Do you perchance know what has happend in the last year to the recommendation for the "Container Import Fee?"

It would seem that if the fee is imposed at the state level, it could easily be diverted from capacity relief, nor would  it go away after paying off the construction bonds. Which leads me to wonder if even imposed at the port level, not the state level, would it really go away.  Especially, as was pointed out in the study, this charge is essentially a subtle tax on the consumers, most of whom live OUTSIDE of the San Pedro Bay Port area...many would consider that "Free Money" and be loath to let it go away...

[rob_l]

The 2005-2006 California legislature passed a measure authorizing a $60 per FEU container fee at California ports. My understanding is that the measure did not offer a specific program of how the money would be spent, but intended the money to be spent on environmental mitigation of port traffic and on improvement of port access infrastructure. The Governor vetoed it.

My report does not make a recommendation on a container fee. It concludes that (1) imposition of a fee without infrastructure improvement will reduce market share of the SPB ports, and (2) if a major program of infrastructure improvement for the San Pedro Bay ports is funded by a container fee just large enough to retire the bonds, the overall market share at the SPB ports would be about the same for the case of no fee and no infrastructure improvement as for the case of a fee and infrastructure improvement.

Best regards,

Rob L.

[Anonymous]

Here's another article on both the Panama and Nicaraguan plans......

http://www.logisticstoday.com/displayStory.asp?nID=8283

The interesting tidbit here is that the Nicaraguan proposal is not meant as competition for the expanded Panama Canal, but rather a supplemental canal to handle the largest ships (those too large for the new Panama Canal).  But 26 hours via a Nicaraguan canal vs 62 hours via Cape Horn?  Is that much of a time savings?

I think someone slipped a decimal point in calculating how much extra time it to to go around Cape Horn. Off the top of my head (and I might be off by 30% or more), the trip around the Horn involves another 7,000 miles or so of sailing - to do that in 36 hours implies the ship is traveling about 200 knots or so.

The way I read it, it would take an extra 36 hours in addition to the 26 hours through a Nicaraguan canal for the Cape Horn trip.  That makes it 62 hours at 100 knots..........

Yeah, it's probably a typo.  Not even the FastShip concept can make triple digits!

[vvtdeb]

Can I add my common sense reply???  I'd wager that the real ANSWER to "will it hurt intermodal..." is the COST of RAIL versus SHIP transport...  Period.  If the dock transloading costs and railroad shipping costs PRICE and PERFORMANCE  themselves out of the transcon buisiness for whatever reasons (wages, improvements, fuel, strikes, capacity, etc. etc.)    then YES the canal will take not just some of the business, but ALL of the business...for good.  Look, understand what is going on here.  The traffic you are shipping in these containers was at one time MADE IN AMERICA products but the JOBS and MANUFACTURING of these goods were taken OVERSEAS by the Chineese (among others).  We love our fellow Countrymen as much as the next guy....unless we have to PAY for your paycheck to make a particular product.  Then it's a blind eye in the "Walmart" store when we pick the 99 cents goods over the $5.00 American-made similar product. If that ship can get the goods from one side of the Country to the other for $1.00 per container versus $5.00 overland via rail...no matter three days later or a week later, what do YOU think the shippers will choose???  It's a no-brainer.  There will be alot of empty container flats rusting away on the empty docks in LA.  COST will be ultimate decisive factor.  If rail can do it CHEAPER....they will KEEP the business. It won't matter if you can put a super-sized ship through the expanded canal  or not.  If it isn't cost effective compared to RAIL it won't be used.      

[solzrules]

rob_I:

Thanks for the info and your report that you posted - it answered a lot of my questions.

 

[Murphy Siding]

     For Nicaragua to even contemplate a canal, the route must be fairly flat.  Why not a 156 mile, dual-tracked railroad, and 2 state of the art port facilities?

[CSSHEGEWISCH]

     For Nicaragua to even contemplate a canal, the route must be fairly flat.  Why not a 156 mile, dual-tracked railroad, and 2 state of the art port facilities?

For those who are unfamiliar with the history of the Panama Canal, the Nicaragua route was long considered a prime route by American interests even as the French were making their attempt to dig a sea-level canal at Panama.  The Nicaragua route, although it would require locks, is a natural version of the lock-and-lake design that was eventually used in Panama.  Lake Nicaragua would be analogous to Gatun Lake, the route to the Caribbean would be provided by a dredged river, and the route to the Pacific would be a much shorter version of the Gaillard Cut.

[JSGreen]

     For Nicaragua to even contemplate a canal, the route must be fairly flat.  Why not a 156 mile, dual-tracked railroad, and 2 state of the art port facilities?

Because of the increased time and expense of transloading.  The economy of ship transport vs rail is largly due to being able to put them on once, transport a great number with a few people (and economy of scale in hull size) and take them off once.  Even with labor (and possibly fuel) being cheaper in Central America, it would add a significant cost increment.  Probably larger than the potential of the $60 per container import tax thats being kicked around for California ports...

If it takes 2-3 days to get containers out of LA, and another 2-3 days to load them, should we expect a new facility to do much better?  That would add 4-6 days to the transit time.  Which would basicaly imcrease the cost of "pipeline" inventory as per the report posted by rob_L.  Businesses dont just look at cost of transporting any longer....the total cost of maintaining inventory is also considered.  Would there be enough traffice of the lower value per cubic foot trafic that would make it worthwhile to trans ship by rail over central America?

Of course, if it were railfans making the decisions, not managers worried about the bottom line, they would already be working on it!