Port enlarges its container capacity to meet Panama Canal’s growth

13th January 2014   ·   0 Comments

By Susan Buchanan
Contributing Writer

The Port of New Orleans is girding for the widening and deepening of the Panama Canal, expected to be complete by spring of next year. The canal’s new dimensions will accommodate bigger ships with more containerized cargo, and could increase traffic at U.S. Gulf and East Coast ports, possibly at the expense of West Coast terminals. New Orleans handles the second most containers—or standardized metal boxes—in the Gulf now, following Houston, and hopes to double its volume by 2020.

A November report from the U.S. Dept. of Transportation and the Maritime Administration, however, warns that while ships will grow in size, affecting traffic, the U.S. Gulf’s receipt of containers per year won’t necessarily increase.

New Orleans port president and CEO Gary LaGrange said preparations for bigger Panama ships are two-pronged and include further modernization of the Napoleon Ave. container terminal and efforts to get the Lower Mississippi River’s draft deepened.

“We’ve invested in the Napoleon Container Yard in incremental fashion since it opened in 2004, with $40 million here, $20 million there,” LaGrange said in late December. In 2012, the port completed a $36 million Napoleon project that added two new gantry cranes, bringing the total there to six. Another 4.5 acres of marshaling area expanded the yard’s container space to 115 acres.

This December, a $28 million Intermodal Railroad Improvement Project got underway. Through it, a 12-acre rail yard next to the Napoleon container terminal will be rehabbed, making cargo movement more efficient and cheaper. The yard has access to six Class 1 railroads, and rail shipments from it already reach Memphis in a day and Chicago in two. When it’s finished late this year, the new rail facility will add 200,000 TEUs of capacity annually to Napoleon’s existing 640,000-container capacity. A TEU is a 20-foot-equivalent box or container that can be loaded on ships, railroad cars and trucks.

U.S. ports are bustling, and the nation’s exports have grown in recent years. On Nov. 8, President Barack Obama toured the Napoleon container site and told a crowd of over 500 people that exports can help the economy expand. The Napoleon intermodal rail project received a $16.7 million TIGER grant from the U.S. DOT in 2012, Obama noted..

In preparation for more Panama Canal business, further investment in the Napoleon terminal is needed, however, LaGrange said. Another $500 million is required to complete the port’s planned Phase II and III improvements, which would add 700,000 TEUs of capacity to the Napoleon site and bring it to 1.5 million TEUs annually, he said.

Port spokesman Matt Gresham said investment options for the terminal, including State Capital Outlay Funding, federal appropriations and private funding, are being explored. “But there are no commitments thus far” towards the needed $500 million, he said in early January. Louisiana’s State Capital Outlay Act appropriates funds for non-state projects.

How exactly are vessels affected by changes at the Panama Canal? Panamax ships have operated since the canal opened in 1914, and were initially designed for its 41.2-feet-deep locks. In 2009, the Panama Canal Authority announced planned, bigger dimensions and began construction on a third lane of locks 50 feet deep for larger ships, called New Panamax. In 2015, the canal will be able to handle New Panamax vessels with a capacity of up to 13,000 TEUs, versus current Panamax vessels with 3,400 to 4,500 TEUs. Locking will take less time and will reduce hours for ships crossing the Atlantic into the Pacific Ocean and vice versa. Completion of the locks will double the canal’s tonnage capacity.

“The Port of New Orleans can already accommodate Post Panamax vessels with 9,000 TEUs of capacity at depths of 45 feet,” Gresham said. The main channel at New Orleans is 47 feet deep, and dredging by the U.S. Army Corps of Engineers keeps the channel at Southwest Pass at 47 feet. The lower river’s main channel varies and is as deep as 90 feet in places. Its shallowest, Congressionally authorized draft is 45 feet between the mouth of the Mississippi River to Baton Rouge, Gresham said. Wharfs along the East Bank of the Mississippi in New Orleans, including Napoleon Ave., are 35 to 45 feet deep.

In a yet-to-be-funded plan to increase the Lower Mississippi’s draft, Phase I would deepen 30 miles from Southwest Pass to Venice, La., opening 175 miles of river to a natural 50-foot channel, Gresham said. Phase II, beginning at Belmont Crossing at river mile 154, would dredge several crossings to mile 232 at Baton Rouge Harbor.

The port is banking on more money for dredging so that a 50-foot channel can be maintained, LaGrange said. He’s optimistic that the Water Resources Development Act of 2013, approved in separate versions by the U.S. Senate and House last year, will be finalized. “Differences in the legislation should be worked out in conference committee in the new year,” he said. “Prospects for getting it passed are favorable.”

The last Water Resources Development Act was passed in 2007, LaGrange noted. “The Harbor Maintenance Trust Fund, approved by Congress in 1986 as an ad valorem tax on U.S. imported cargo, raises $1.6 billion a year,” he said. “But only $600 million to $700 million of that has been appropriated to ports annually.” Under the new WRDA, the Army Corps would receive a greater share of HMTF revenue and could use it on dredging. Moreover, the Senate version of the WRDA bill would authorize federal maintenance dredging of deep-draft seaports by up to 50 feet, compared with a current 45 feet.

New Orleans wants to go to 50 feet, LaGrange said. “Only thirty percent of U.S. ports are at their project depths now,” he said. “Ports are working together to get WRDA 2013 passed in an all-for-one, one- for-all effort.”

LaGrange said increasing the Lower Mississippi’s draft from 45 to 50 feet throughout would cost $300 million initially and then $90 million to maintain every year. He said a study by economist Tim Ryan, completed for the state’s Dept. of Transportation and the Big River Coalition last year, found that every dollar spent on dredging the Lower Mississippi would generate $89.40 in regional benefits. Ryan is a former University of New Orleans chancellor.

Shipments leaving New Orleans include chemicals, foodstuffs and forest products. During his visit here, President Obama noted that his home state of Illinois sends corn and wheat, which are bulk rather than containerized goods, down river to Louisiana for customers all over the world. As for imports, the Crescent City receives foreign steel, rubber, plywood, coffee and non-ferrous metals. In the latest available annual figures, break-bulk and general cargo at the port expanded in 2012, while containerized cargo was little changed from the previous year. LaGrange attributed the port’s lack of container growth in 2012 to still-struggling economies in Europe, the port’s biggest trading partner.

As for the future, a Panama Canal study, released by the U.S. DOT and the Maritime Administration in November, said larger ships will increase the volume of containers that must be moved during a vessel’s port call to make the trip profitable. Fewer, more concentrated ship calls are expected at larger ports by vessels serving routes between Northeast Asia and the U.S. Gulf and East Coasts. Fewer calls by bigger ships will mean higher, peak-load activity at ports. But the number of containers that U.S. Gulf and East Coast ports receive won’t necessarily increase annually, the report said. “Ports with greater capacity in container handling, storage, and movement to inland destinations will be in a better position to serve these vessels than ports with capacity deficiencies,” the DOT-Maritime Administration report said. The federally commissioned study can be found on the web at www.marad.dot.gov/documents/Panama_Canal_Phase_I_Report.

With its focus on improvements at the Napoleon terminal and on river depths, New Orleans wants to ensure that New Panama vessels will visit the port.

This article originally published in the January 13, 2014 print edition of The Louisiana Weekly newspaper.