Panama Canal Expansion Raises Expectations in Houston

From his office window, Ricky Kunz, the Port of Houston Authority’s vice president for origination, watched the action unfold. As workers drove Volkswagens off one vessel onto a dock, a neighboring ship was loaded with cargo, destined for the Far East. Freighters that dock at one of the world’s busiest ports cannot afford to leave empty.

The port is overseeing $3 billion in updates to its berths and cranes and other facilities, many of which are being completed in anticipation of the 2014 debut of the expanded Panama Canal.

Local officials agree that the canal’s expansion will be a financial boon to Texas — and in particular, the Port of Houston, which should see more and larger container ships docking in its berths. But officials disagree on the size of the economic benefits and the ability of the state’s already congested railways and roads to handle the predicted significant uptick in traffic.

Kunz expressed confidence that the port, which had a record 8,073 ships call in 2011, will be ready for the increased traffic resulting from the canal’s expansion. But he is wary about predictions of explosive, unprecedented traffic at the port and then northward, as trucks and trains travel through Texas, hauling cargo to the Midwest.

“I think that we will see an increase, but we are very, very conservative in what we forecast, about a 15 percent increase of the traffic we get on the trade lane from Asia to Houston,” Kunz said, discussing the movement of container ships.

 

“What we do know is that this third set of locks that’s being built is going to create a redistribution of cargo,” he said. “It’s not going to make the cargo grow. It’s just going to be a redistribution.

“The West Coast is going to lose some. We’re going to get a little bit. The East Coast ports are going to get a little. Everyone is going to share a little bit more in the wealth.”

The seven-year expansion project will be the canal’s first major widening in 100 years. In addition to being widened, the canal will double its capacity with two new sets of locks.

Jeff Moseley, president and chief executive of the Greater Houston Partnership, says the canal project is “a huge game-changer and the project of the century.” “It will take us decades to fully realize the potential of this new capacity,” he added.

Moseley is quick to emphasize the existing advantages of Houston as a port city, namely its railroad system. He said the rail lines would provide relief for highways clogged with cargo-laden trucks making the same passage as the trains, though less efficiently.

“There will be no more railroads built in America if you can imagine how prohibitive the cost would be, but Houston is blessed with this very strategic network rail — a fabulous grid that literally connects Houston between the Rocky Mountains and the Ohio Valley,” he said.

Harris County Judge Ed Emmett had promoted the Port of Houston’s potential to be the “gateway of North America” for years. He agrees that the Panama Canal is a “big plus” but does not think it will be “the panacea that a lot of people think.” He suggested that the current rail system might need work.

“The rail system needs to be redesigned, because even though the two major railroads serving here do a good job, the rail system was designed well over 100 years ago, and a lot of those rail tracks still go through downtown, which doesn’t make any sense,” he said.

With so many variables in the shipping industry and the competing ports lining the United States’ edges, it is impossible to forecast what shippers will do.

Kunz hesitates to make predictions. “I’ve talked a lot about the expansion of the Panama Canal in the last couple of years,” he said, “but the one thing I’ve learned is that nobody really knows what’s going to happen.”

The Greater Houston Partnership is a corporate sponsor of The Texas Tribune.

 

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