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Panama Canal expansion could threaten Mexican port plans, experts say

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An expansion of the Panama Canal to allow passage for a new generation of megaships may be threatening plans to build a new port at Punta Colonet on the West Coast, 150 miles south of San Diego.

The Mexican and Panamanian projects are envisioned as gateways for an increasing amount of Asian goods bound for the populous East Coast of the United States. Both would relieve growing congestion at West Coast ports, such as Long Beach and Los Angeles, Seattle and Oakland. But some experts are saying that Mexico's chance to offer a new trade route has passed. "The expansion of the Panama Canal almost single-handedly kills Punta Colonet," Joseph P. Ritzman, project development manager of SSA Marine's terminal operations in Mexico, said at a recent Long Beach, Calif., ports conference. SSA has been considered a possible bidder for a Mexican government concession to develop the Colonet project, at an estimated cost of $9 billion. Mexican government officials have said they would like to start the bidding process this year for the port and rail line to the U.S.-Mexico border. Ritzman joins other industry executives and transportation experts who say retailers in the American heartland would be more efficiently served by ships from China and other Asian countries transiting the Panama Canal and sailing directly to Gulf Coast and East Coast ports. "Then, you can avoid this whole question of intermodal transport," he said, citing the practice of transferring cargo containers from ships to rail or truck for delivery to their final destinations. While Mexican officials and shipping executives hope Colonet will be processing Asian containers by 2011, Greg Watkins, president of Watkins/Baile and Associates, a development firm with a stake in expansion of competing Mexican ports, said Colonet will not be operational until 2028. "I have my doubts about Colonet. There is nothing there," he said. Although there has been a slowdown in trans-Pacific shipping this year, due largely to the downturn in the housing industry, trade is expected to double over the next 10 years and triple by 2025. With the new generation of megaships carrying 8,000 to 10,000 TEUs - the standard measure of containerized cargo - West Coast ports are unlikely to be able to handle the load, despite expansion projects in the works everywhere from Prince Rupert in Canada to the giant Los Angeles-Long Beach complex that processes two-thirds of Asian shipments into the United States. "There's already congestion. We're doing everything possible to address these issues," said Mario Cordero, president of the Port of Long Beach's Harbor Commission. Cargo volume at the two ports jumped 66% between 2000 and 2006, largely because of the increase in goods from Asia. The shipping industry has become preoccupied with the problem, but the Panama Canal project promises some relief. The $5.25 billion overhaul will double the canal's capacity by adding a third set of locks that are 40% longer and 60% wider than current ones. "We'll have a comparative advantage - location, location, location - as long as you have capacity, capacity, capacity," said Rodolfo Sabonge, the Panama Canal Authority's director of corporate planning and marketing. The authority probably will be raising rates to pay for the expansion, he said at a terminal operators conference in Acapulco last year. The overhaul is the greatest modernization since the United States built the canal in 1914. It is expected to be finished by 2018. "What the Panamanian people are doing is a necessity for the continent as a whole," said Cordero of the Port of Long Beach. Cordero, among industry insiders who believe there still is a need for Colonet, said he gets more inquiries about the Mexican project than any other. "Trade is growing at an unbelievable pace, and everybody needs to do whatever they can to accommodate that, whether the expansion of the canal or the development of a port," he said. Mexican President Felipe Calderon gave the Punta Colonet project a high priority in his plan to invest $234 billion in the country's infrastructure over the next five years through partnerships with the private sector. His strategy is to use improvements in the transportation infrastructure as a lever to raise Mexico into a central role in North American supply chains. The project, initiated under the Vicente Fox administration, should have been in the works but has been stalled by a mineral group's claims to precious metals in the seabed where the port is envisioned. SSA Marine, which manages Manzanillo, Mexico's largest container port operation, aligned itself with the group, Grupo Mineros Lobos, in a deal that would ensure that it would build at least one of Colonet's terminal operations. "We have distanced ourselves from Grupo Lobos. We are no longer involved with them," said Ritzman, the SSA project development manager. The company plans to significantly expand capacity of its operations at Manzanillo, he said. Ritzman did not rule out SSA bidding to develop facilities at Colonet. "We'll look at that project on a project-by-project basis," he said. Steven G. Lautsch, executive vice president of MTC Holdings, an Oakland, Calif., terminal operator company that also has expressed interest in the Colonet port, said he thinks the project will attract numerous bidders. While the Panama Canal project will be able to accommodate larger ships, he noted, there are few if any ports on the East Coast that can accept the megaships. "They have to have a destination somewhere," Lautsch said. He said shipping patterns favor the larger vessels from Asia entering a West Coast port and transferring cargo at an intermodal facility for delivery by rail or truck to consumers in the far reaches of the United States. "And where better than Colonet?" he asked.
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