Trans-Panama railroad opens in July

Trans-Panama railroad opens in July

Maersk Sealand will use rail alternative to Panama Canal until Balboa terminal expansion is completed.

by tony beargie

A new high-speed trans-Panama rail system that is expected to be a major boom to world shipping by the year 2003, is scheduled to open during the first week of July.

The Panama Canal Railway Co. is a joint venture of Kansas City Southern Railway and Chicago-based Mi-Jacks Products, which is supplying the system’s intermodal and container handling equipment.

The 47-mile railroad runs parallel to the Panama Canal, and links the Atlantic port of Colon to the Pacific port of Balboa.

The $80-million system is a revitalization of the Panama Railway that ran between Panama City and Colon. The original railroad survived from the 1850s until 1993, but fell into disuse as container traffic boomed.

Realizing the potential for container traffic and luring ships that want an alternative to the canal, KCS Railway and Mi-Jacks began construction in 1998.

They new railroad will provide locomotives and rolling stock capable of traveling up to 95 kilometers per hour (about 60 mph).

The railroad doesn’t view itself as a competitor to the Panama Canal, but as complementing the Canal and the free trade zone at Colon, and major port terminals at Colon, Balboa, Cristobal and Manzanillo.

The rail link will give shippers a new and faster option to move cargo across Panama by truck or the canal.

About 14,000 vessels transit the canal each year, with transit times ranging from eight and 12 hours. This does not include the waiting time vessels undergo to obtain clearance to transit the canal.

The total transit time including waiting time averages 36 hours for vessel operators, said Thomas Kenna, marketing director of the Panama Canal Railway. And "some vessels wait as long as three days to get permission to transit."

By contrast the new rail line will be able to cross Panama in one hour and 20 minutes.

Growth Projections. During its initial phase, the railroad expects to carry 75,000 to 100,000 containers per year, Kenna said.

The system will be largely limited to Maersk Sealand shipments until the terminal at the Port of Balboa is expanded in 2003. By then, Kenna predicts the railroad will move some 500,000 containers yearly when other shipping lines are able to use the expanded Balboa terminal.

Maersk Sealand has the Balboa terminal operating at capacity, Kenna said.

Kenna expects large post-Panamax ships to use the railroad, as well as ships that are able to transit the Canal.

"We’re prepared to run up to 12 trains daily in both directions," Kenna said. "Our philosophy of operation is short, frequent transportation."

Each train comprises six cars, with each car having five wells to hold containers, for a total capacity of 60 40-foot doublestacked containers, Kenna said.

Canal Limitations. The railroad said it can use two major limitations of using the Panama to its advantage, Kenna said. One, maximum draft of the canal is only 39.5 feet, which limits how loaded ships can be transiting the canal.

A typical Maersk Sealand vessel fully loaded could draw over 45 feet. The shallow draft means that ocean carriers are forced to leave cargo coming from Asia and other points behind — as much as 10 percent, Kenna said.

Because of the draft limitation, carriers could not take advantage of the vessel’s full potential. "Now Maersk Sealand will be able to come fully-loaded," Kenna said.

Another limitation is that Canal pilots limit the stacking of containers so that they are able to view two ship lengths ahead of the vessel, Kenna said.

Negotiations. Maersk Sealand and the railroad held preliminary talks before formal negotiations were expected to begin the week of May 21.

"We expect to sign" a contract for one year, with renewal options, but the ocean carrier has concerns over pricing," said Hans Stig Moller, managing director of Maersk Panama, S.A. "We’re confident that we can reach an agreement by mid-June."

"We see this (the new railroad) as an interesting option," Moller said. However, there is a cost involved "each time one handles a container."

Maersk Sealand already operates its own trucking company in Panama, Moller said. Bridge Intermodal Transport moves cargo between Balboa and Manzanillo. Transit times run between one and one-half hours to two hours, depending on the time of day, Moller said.

"Our trucking operations are working well," Moller said.

Moller expects Maersk Sealand to use the railroad, but the company has not decided just how much of its cargo will be moved on the new system.

Three major factors — cost, safety and transportation reliability — will be weighed in making its decision, Moller said.

Whether or not Maersk Sealand will continue to truck some of its cargo "remains to be seen," Moller said.

"There’s no doubt that rail is a safer operation" than trucking, especially for quarantine-restrictive cargo, Moller said. This amounts to about 35 percent of the shipping line’s cargo moving through the canal.

Overall, Moller gives high marks to the new rail system. "It appears to be a first-class railroad. There’s no question about that," he said. "We feel very confident in their ability to move this project forward."

Moller sees the railroad as a viable option for over-flow cargo and for the repositioning of empty containers, but does not foresee an influx of post-Panamax vessels using the system due to cost factors.

Poul Bastrup, P&O Nedlloyd’s general manager for Panama operations, predicts that when the Balboa facility is enlarged, more new ocean carrier services will be introduced.

Likely developments will probably include new North/South trade services and new services connecting to the Atlantic, Bastrup said.

For now, Maersk Sealand has the market advantage. "It’s very much a Maersk Sealand dominated terminal (at Balboa) and railroad right now," Bastrup said.

Frank Zeimetz, president of Unigreen Marine S.A., agents for Evergreen Lines in Panama, said the company has yet to find out what the rail transportation costs will be. But he predicts "they will be lower than trucking."

The new railroad will also be more efficient than trucking, he said. "It’s easier to move cargo by rail than by using many trucking lines," he said.

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