Market Overview

The Panama Connection: By Truck And Rail, Not Canal

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The Panama Connection: By Truck And Rail, Not Canal

When people think Panama vis-à-vis shipping, they think of the canal. It's actually a lot more complicated and interesting than that.

Panama boasts an integrated multi-modal transport network made up of container terminals at either mouth of the waterway linked by both a rail line and a highway, allowing for train and truck moves in either direction between the coasts. Container lines don't just pass through Panama via the canal, they also utilize the country's "land bridge."

This transport complex, comprising multiple stakeholders and competing interests, is ripe for digitalization.

New Jersey-based Advent Intermodal — which has already implemented its eModal port-collaboration platform in Oakland, California; the Port of New York & New Jersey; the Virginia Port Authority; and soon, the ports of South Carolina — is taking up the challenge.

Advent is initially working with two terminals on the Atlantic side of Panama, Manzanillo International Terminal (MIT) and Colon Container Terminal (CCT), and hopes to ultimately integrate all of the country's stakeholders into the new "Portal for Panama" system.

The Land-Bridge Network

There are two competing terminals near the Pacific entrance of the canal. The largest and oldest, Balboa, is on the eastern bank of the waterway and is operated by Panama Ports Co. (PPC), a subsidiary of Hong Kong-based behemoth Hutchison Whampoa. A newcomer, PSA Panama, operated by Singapore's PSA International, debuted on the western bank in 2010 and unveiled a major expansion in 2017.

There are three terminals on the Atlantic side of Panama in the city of Colon. The Cristobal terminal is a sister facility to Balboa, also operated by PPC. U.S.-based terminal company SSA Marine, a subsidiary of Carrix, operates MIT. Taiwanese container-line company Evergreen Marine operates the adjacent CCT.

The Panama Canal Railway runs adjacent to the canal. Photo courtesy of Shutterstock

PPC's Balboa on the Pacific and Cristobal on the Atlantic are directly connected by the Panama Canal Railway (PCR), a joint venture with Kansas City Southern (NYSE: KSU). In Balboa and Cristobal, boxes are moved from the yards to the train by PPC trucks. MIT and CCT also use the railway to connect with Balboa; in the cases of those two Atlantic terminals, boxes are picked up at the PCR rail ramp by drayage trucks and transported a short distance to the gate.

It generally takes three days to move containers off a ship on one coast, overland by rail, then by truck to the gate, and then onto a ship on the other coast.

Containers are also moved between the two coasts by trucks using the Panama-Colon Expressway. There are three main trucking companies handling the land-bridge business: Bless Truck, Panama Transhipment Group and TLC.

Panama Canal Expansion

There have been two major developments in the Panama land-bridge market over the past three years. The first was the opening of the larger canal locks. The Panama Canal used to allow transit of container ships with a maximum capacity of around 4,500 20-foot-equivalent units (TEU). The expanded locks opened in June 2016, allowing for transit of ships of up to 15,000 TEU.

Prior to the expansion, container lines led by Maersk pioneered a service model in the mid-2000s that heavily utilized the Panama land bridge. Ships too big to transit the canal would drop off boxes in Balboa, and those containers would then be moved by rail to Cristobal, MIT or CCT for transshipment (in the case of Maersk, to MIT).

The Balboa-rail-Atlantic-port concept emerged as a major factor within the ultra-competitive Caribbean transshipment arena, going head-to-head with hubs in Cartagena, Colombia; Kingston, Jamaica; Caucedo, Dominican Republic; and Freeport, Bahamas.

The Panama Canal expansion didn't end the land-bridge concept, but it did change the emphasis. According to Juan Carlos Croston, vice president of corporate affairs at MIT and president of the Caribbean Shipping Association, "The land bridge definitely went from being a core part of the shipping lines' business to being more of a complement to the overall network employment."

Nevertheless, it's still an important piece of the network puzzle, he told FreightWaves. Croston noted that in the case of MIT, 10-15% of its transshipment business continues to use the land bridge. He also pointed out that prior to canal expansion, boxes heading from the Atlantic side to the Pacific side via rail were 90% empties, and that figure is now closer to 60%.

The Rise Of PSA Panama

The second major land-bridge development of the past three years was the expansion of PSA Panama and the tightening of ties between that terminal and the world's second-largest container line, Mediterranean Shipping Company (MSC).

MSC previously conducted transshipment via the Balboa-rail-Cristobal connection. Given its heightened relationship with PSA Panama, which is believed to involve equity, MSC switched volumes to that terminal. 

According to government statistics, Balboa's throughput in January-September 2019 was 1.42 million TEU, down 772,473 TEU or 35% from volumes in the first nine months of 2017. In contrast, PSA Panama's throughput was 697,882 TEU in January-September, over 10 times the volume in the same period of 2017.

This shift has had enormous implications for the land-bridge mode of transport because PSA Panama is on the opposite side of the canal as the railway. All of its boxes going to the Atlantic terminals must go by truck.

Croston noted that the PSA Panama truck moves to the Atlantic go to Cristobal, the terminal that traditionally handles MSC boxes. As a consequence, the land-bridge moves MIT and CCT handle are primarily non-MSC containers coming to Balboa, brought by rail to the Atlantic coast, then moved to the terminal yards by dray trucks.

How The Portal Could Improve Transparency

In an interview with FreightWaves, Advent Intermodal Chief Strategy Officer Allen Thomas explained that the Portal for Panama "will have the same back end and functionality as eModal but will have a custom front end. It's going to be specifically built for the Panama sector since it's a pretty unique cargo flow."

Advent Intermodal has previously done business with SSA Marine in the U.S., and the Panama concept arose through that relationship. "We're integrated now with the MIT data, although there are still some tweaks before it goes to production, and we started with CCT a month and a half ago and we are finishing the testing," Thomas said.

"This is all about digitalization. It's about real-time visibility," he explained. "Some people will only want to use the website; others will want to use the API capabilities. Truckers will be able to get all the information they need in one place, and if there are any requirements or fees, they'll be able to clear all that in one place. For terminal operators, it's about fewer support calls and the biggest impact will be on their gate flow and reducing gate congestion."

The initial focus will be on the drayage moves from the PCR rail ramp to the gates of MIT and CCT, but the ambitions are ultimately countrywide.

"The ability of these two Atlantic terminals to share and integrate the rail and drayage data that's coming at them will allow them to streamline their gate operations — that will have tremendous value," Thomas said. "If there's one place to go for two terminals, it's one less website stakeholders have to navigate. And I think that once we prove the model, it will tip the scale [and others will join]."

He said there was a meeting of Panama terminal operators, the rail company and trucking companies earlier this year to discuss the platform, and the response was positive. "Some [terminal operators] hinted that they didn't want to be the first and want to see how it goes, but the truckers were pretty adamant about how impactful this would be," Thomas said.

According to Croston, "The more visibility, the more we can improve service and reliability. We believe that having all land-bridge players involved in one platform can bring great benefits, not only to the users [container lines], but also to the terminal operators because it will allow us to better predict when we need to deploy assets, whether we're planning for one day, one month, or one year."

Asked whether there were complications in a Panama-wide port community system given inter-terminal rivalries, he responded, "Yes, there is a concern. In most port-community systems, the largest target is local importers and exporters and NVOCCs [non-vessel-operating common carriers]. The target of the [port community] system here is to improve connectivity via the land bridge between terminals. In 99% of the world, when a container leaves a terminal and is put on a train, a BCO [beneficial cargo owner] picks it up. In Panama, the container goes to another terminal.

"I think the first thing the platform has to show is value. And then, we have to have good faith among all the [terminal] players to move forward — and that good faith is going to be even more important than showing value," Croston predicted.

More FreightWaves/American Shipper articles by Greg Miller

Image by Michael Krämer from Pixabay

Posted-In: Freight Freightwaves LogisticsNews Commodities Global Markets General

 

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