Planned Expansion of the Panama Canala brief discussion of the potential effectsWestern Dredging Association, Eastern & Gulf Chapters2007 Fall Meeting, Oct 9-11, Philadelphia

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WHAT IS WIDENING THE PANAMA CANAL?

Construction of two lock facilities One on the Atlantic side {Gatun}, One on the Pacific side {Miraflores}, Each with three chambers and three water reutilization basins

Excavation of new access channels to the new locks, and Widening existing navigational channels, and

Deepening of the navigation channels along with The elevation of Gatun Lake’s maximum operating level”

“The third set of locks project is a plan to expand the Canal’s capacity composed of three integrated

components

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MANY ROUTES FROM ASIA TO INLAND US

29

EXAMPLE: SOUTHEAST ASIA TO CHICAGO, IL

24 1

3

1

2

3

Alternate, competitive routes Various ocean services Western ports or via

canals Combined with inland

transportation connections Choices made based

on . . . Timeliness Rates, which are a

function of operating costs Inland connectivity Location of distribution

centers

4 1b

Regions colored with the predominant Port that directly supplies > 25% of the region’s Asian TEUs

Savannah

Norfolk

NY/NJ

Houston

Sea/Tac

Los Angeles

Oakland

Miami +

Charleston

CHI

ATLMEM

DFW

PIERS DATA INDICATE PORT HINTERLANDS

5

21

Net effect of 37% more container ship crossings and 25% more TEUs per crossing is approximately 71% more container capacity through the Panama Canal

• Overall Canal crossings are expected to increase from 34 to 41 per day (21% increase)

• Higher-value container crossings are expected to increase by 37% to approximately 9 per day

CONTAINER VESSEL CROSSINGS PER DAY CONTAINERS PER PANAMAX SHIP

• More TEUs (+25%) on the same number of closer-to Panamax vessels

• 75% of the ~4,800 TEU limit (3,570 TEUs) is a reasonable maximum0

1,000

2,000

3,000

4,000

5,000

2001 2003 201X

3,570

2,8582,450

Panamax Capacity 4,800 TEUs

75% of max.

capacity

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0CONTAINERS PER YEAR

mill

ion

TE

Us

2001 2003 201X

4,382,000

6,781,000

Reasonable Maximum w/o 3rd Set of Locks = 11.6MM TEUs/yr

2001 2003 201X

5.5

6.58.9

RecentImprovements

HISTORICAL DEMAND VS. MAXIMUM CAPACITY

0

2

4

6

8

10

4.9

6

ACP is responding to market Spurred by 2002 “lockout” Re-pricing of high value

freight Guaranteed crossing “slots”

Building infrastructure to increase capacity of existing locks New towing locomotives Updated lock hydraulics Gaillard Cut channel widening On-line reservations system Improved lighting

SIGNIFICANT PRE-WIDENING EXPANSION

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OBJECTIVES OF WIDENING

Achieve long-term sustainability and growth for the Canal’s contributions to the National Treasury;

Maintain the Canal’s competitiveness, ensuring continued beneficial impacts on the economy and industries of Panama;

Enable the Canal to capture growing tonnage demand with appropriate levels of service for each market segment;

Make the Canal more productive, safe and efficient.

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CAPACITY TO SERVE A DIVERSE MARKET

New capacity utilized For highest-value freight

Other cargo too Higher value freight has

“pushed out” bulk cargo Coal and LNG projects

are waiting

New port developments Balboa, Cristobal, Colon Callao, Barranquilla,

Aguadulce, Cartagena

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3rd Channel will follow historical excavation effort 1939 dredging by United

States Alongside both Gatun

and Miraflores

Freshwater will be re-used Water Saving Basins

alongside each lock Proven technology

WIDENING WILL UTILIZE EXISTING OPPORTUNITIES

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Current “Panamax” 294m LOA 12m Draft (from 11.5m) 32m Beam 4,500 TEUs max

Envisioned New Capacity 366m LOA 15m Draft (≈ 50 ft) 49m Beam 12,000 TEUs max

Panama Canal will not be the constraint to Asian => US shipping services Hence new projects at major ports (e.g., Hampton

Roads, NY/NJ) to keep up Savannah and Charleston deepening as well

ABILITY TO HANDLE THE ‘LARGEST’ SHIPS

11

PANAMA CANAL RATE INCREASE

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REDUCTION IN SHIPPING COSTS . . . AND RATES?

Ocean Shipping Costs Actual rates fluctuate Fully-allocated estimate

of North Asia => USEC $2,000 ~ $2,200/FEU

Based Upon Risk-adjusted return Ship capital cost Fuel, Crew, Tolls Excludes port

terminal and inland transportation costs

Larger ships will reduce costs per TEU Approx. 20% reduction if size increases from

4,500 TEU to 12,000 TEU capacity Your mileage may vary

-

0.2

0.4

0.6

0.8

1.0

1.2

4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000

Vessel Size TEUO

cean

Slo

t C

ost

Ind

ex

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PANAMA CANAL RATE INCREASE

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$400 WILL GET YOU ONLY SO FAR . . .

$300~$400 reduction in total costs via East/Gulf Coast Costs to West Coast ports

are unaffected So Least Cost Market Area

moves ≈100 miles west/north Ignores speed, service

West Coast port service to mini-landbridge intermodal has proven to very desirable

Largest growth will continue to be in the high population markets along coasts Mid-East markets (Columbus, Nashville) will

continue to be served via West Coast

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ILLUSTRATIVE EXAMPLE OF PORT GATEWAY SHIFT

PIT

ATLMEM

DFW

CLT

JCK

CMH

Currently, All Water service from (North & Southeast) Asia is primarily for delivery to locations near East and Gulf Coast

port gateways

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MODEST REDUCTION FOR ALL WATER SERVICES

PIT

ATLMEM

DFW

CLT

JCK

CMH

Currently, All Water service from (North & Southeast) Asia is primarily for delivery to locations near East and Gulf Coast

port gateways

With reductions in shipper costs for All Water service, some additional destinations may be served via East and Gulf Coast

port gateways

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PANAMA CANAL RATE INCREASE

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BY ~2016, THE PANAMA CANAL WILL BE READY

50’ channels to allow the largest ships through

But will the East & Gulf Coast ports be able to receive them?

Thank you for your time & attention!