Antecedents, Status and Future Implications

Richard A. Wainio Former Planning Director Panama Canal Commission

 May 1879: Baron Godin de Lepinay Canal Lock proposal at the International Congress for Study of an Interoceanic Canal ignored.  1881-1889 Failed French effort to build sea level canal.  January 1906: “Report of the Consulting Engineers for the Panama Canal” recommended a sea level canal in Panama.  February 1906: Chief engineer John Stevens argued for a lock type canal and convinced Roosevelt to override the advisory committee.  June 1906: By vote of 36-31, the Senate approved a lock type canal. Engineers on the Isthmus immediately began work utilizing a design essentially the same in its key elements as the de Lepinay plan proposed 27 years earlier.

 1908: Decision to enlarge locks from 95 feet to 110 to accommodate largest battleship, USS Pennsylvania (98 feet); largest commercial ship, RMS Titanic, had beam of only 94 feet. Although it was a strategic decision, larger lock size increased capacity and enhanced the Canal’s long term utility for commerce.

RMS Titanic USS Pennsylvania

6 7

’ o 1904-1914: Original construction and design o 1939-1942: Panama Canal Third Locks Project o 1945 –1999: US Navy strategy/Two Ocean Navy/Angle deck aircraft carriers o 1945-1948 Sea level canal feasibility studies o 1964-1970: Interoceanic Canal Studies Commission sea level canal study o 1977: Treaty requirement to jointly study sea level canal o 1985-1993 Tripartite Canal Alternatives Study

11 o July 1940: Work began on new locks to be 1200’ by 140’ to accommodate Montana-class battleships. o May 1942: Battleship construction was suspended in May 1942 and shortly after Third Locks Project halted. o Extensive work completed is big component of current locks expansion.

Montana-class battleships: Length 920 Beam 121

o Post WWII strategic value of the Canal to the US Navy declined as angel deck aircraft carriers became the center piece of Navy strategy o 1964-1970 sea level canal studies conclusions essentially ended any serious further pursuit/interest in a sea level passage through Panama

USS Antietam converted to USS Forrestal – First angle deck in 1952 purpose built angle deck carrier 1955 Beam: 238’

The Container Revolution -April 26, 1956

SS Ideal-X, 524 ft. long; 58 containers

MV Emma Maersk, 1302 ft. long – 13,800 19 containers Containerization & Globalization

. Containerization dramatically lowered transportation costs and greatly reduced the time to market.

. By itself it did not create the 21st century global economy but it was a core building block. Other factors of course played a role – GATT, the Staggers Act, double stack trains, the computer, internet, large jet planes, the opening of China and the breakup of the Soviet Union.

. But it was containerization that allowed the creation of global supply chains, brought logistics into the commercial vocabulary, set the stage for just in time manufacturing reducing the need for large inventories, allowed globalized division of labor and set the stage for the dramatic growth in world trade and larger and larger ships.

21 22 Development of West Coast Intermodal – Double Stack Trains

Panama Canal Cargo by FYMajor 2010 Segment – FY 2011Ca

113.59 Container 104.59

79.94 Dry Bulk 72.59

34.68 Vehicle Carrier 33.05

48.99 Tanker 46.56

12.83 Refrigerated 14.59

10.77 Passenger 10.34 FY2011

9.19 FY2010 General Cargo 7.78

11.71 Others 11.30

0 20 40 60 80 100 120 PCUMS (in millions) Six Generations of Container Ships

27 New Directions, New Vision o 1993: Tripartite Canal Alternatives Study concludes that present Canal with planned improvements could serve traffic demand until 2020. o Internal PCC studies suggest canal capacity could be pushed to limits soon after 2010 even with planned improvements. o 1996: Regina Maersk is commissioned. First PostPanamax containership with capacity exceeding 6000 TEU. Sovereign Maersk under construction (arrived 1998) has 8000 TEU capacity. Increasingly clear more PostPanamax vessels are the future in container shipping. o 1996 : Alberto Aleman Zubieta appointed Canal Administrator.

28 29 o 1997: Expansion intentions announced at Universal Congress on Panama Canal o 1997: Canal Expansion Office established– planning for expansion begins o 2005: Expansion Master Plan Completed – need for and feasibility of third lane of larger locks was confirmed o 2006: Referendum in Panama provides green light for the expansion project o 2007 Construction officially begins

Pacific Locks Concept Looking North

Lock Chamber Vessel size Length: 427 m LOA: 366 m Width: 55 m Beam: 49 m 33 Depth: 18.3 m Draft: 15.2 m

Volumes of Dry Excavation and Dredging Used for the construction of the locks

Existing locks: 200 Mm3 New locks: 155 Mm3

1886 2007

1909 2008 Volume of Concrete Used for the Locks Construction

Existing locks: 3.4 Mm3

New locks: 4.7 Mm3 Dimensions of Locks and New-Panamax Vessels

Existing Locks Max Vessel: 4,400 TEU’s 33.5 m (110’)

32.3 m (106’)

55 m (180’)

12.4 m (39.5’)

12.8 m (42’) Beam 49 m (160’)

18.3 m (60’)

New Locks Max Vessel: 12,600 TEU’s

60 % Savings

64 Culvert Valves, 72 Conduit Valves, 16 Bypass Valves (2 Spares each). 6.5 by 4.5 m, (21 by 15 feet), 15.5 tons, 12.75 and 5.75 tons Physical model first “built” in 3D to save time during construction and optimize future Scale 1:30 potential modifications

5699 miles LOS ANGELES NEW YORK SHANGHAI

8566 miles

PANAMA CANAL All-Water 23 – 26 days West Coast 15 – 18 days Time Savings 5 – 11 days 2010 1990 1983 1976 West Coast 65% 80% 30% 15% All-Water 35% 20% 70% 85% Assumptions • $400/MT bunker • Canal tolls based on 2011 proposal • Current ship charter rates • Inland move by rail

4000 TEU ship 8000 TEU ship

46%* 63%*

• Left of the black line = West Coast has the cost advantage • Right of the black line = East Coast has the cost advantage

*Share of the US population . Response of West Coast ports & railroads

. Shipper supply chain strategies – still shorter and faster via West Coast ports.

. Ocean carrier strategies including trans-shipment and relay services

. Shifting global production . Channel and berth depths

. Port/terminal capacity and expansion plans

. Emergence of the Gulf Coast as competitive alternative

60 50 50 45 50 45 45 43 42 42 40 40

Miami Norfolk Mobile Tampa New York Houston Charleston Savannah Jacksonville Source: Port Websites; CI; AAPA Seaports of the Americas; Norbridge Analysis Percentage of active world fleet that has a max draft (-2ft under keel) less than or equal to the Port’s channel depth United States

Tampa• •Freeport

• Kingston• Mexico Caucedo

Colon/MIT• •Cartagena South America 59 1996: 235K TEUs 2010: 5.6 M TEUs 2011: 6.5 M TEUs 2015: 8.4 M TEUs (E) 2020: 12.4 M TEUs (E)

PSA Panama Ports Company – Cristobal

Colon Container Terminal Manzanillo International Terminal (MIT) Panama Ports Company - Balboa Florida’s Gateways

. Containerized imports shipped from Asia to consumers in Florida…

. 38% enter through Florida’s seaports…

. 36% through Los Angeles…13% through Savannah…4% through New York. Florida Seaports’ Economic Impact

Cargo related activity at Florida seaports generates more than 550,000 jobs and contributes $66 billion in economic value to the state.

The cruise industry provides 123,000 jobs and brings $6.3 billion in spending to the state.