TBY talks to Paul Wallace, Executive President of Panama Ports Company (PPC), Hutchinson Ports, on the consequences of canal expansion, adding value in logistics, and future priorities for the company.

Paul Wallace
Paul Wallace has been in the transport industry for over 30 years, covering most disciplines from heavy lift, shipping, and road and rail transport to ports. He spent 15 years with AP Møller-Maersk in various capacities and then went on to the port industry. He was Commercial Director at the Port of Felixstowe, one of the largest ports in Europe. He subsequently took over the position of CEO at Dar es Salaam Port in Tanzania. He moved to Panama in 2016 to take on the challenge of moving PPC into the next era.

What are the defining trends emerging in the logistics and shipping industry in Panama and the region?

The speed of change in the shipping industry today is fantastic. Things are happening so rapidly and we see forced consolidation within the shipping industry. Panama is the epicenter of transport and logistics for the Americas and beyond; our footprint here certainly touches most major global trade routes. The expansion of the canal has its own consequences; larger vessels can now connect Asian production with the US without breaking the supply chain for transshipments. This means there is now less demand on transshipment ports in the Panama Pacific. Larger vessels are more efficient so bigger vessels going through the canal are great for Panama. The Panama Canal Authority (ACP) reflects this in its tariff pricing to ensure that mega-vessels, the Neopanamax vessels, have certain discounts and concessions. As the trend for transshipment goes down we then see the demand to “top off” those large vessels increasing. Panama as a nation needs to go beyond its paranoia about port capacity and look to add greater value to the supply chain. This is why the priority and focus for Panama for the future needs to be focused on logistics, hence our economic approach two years ago to develop the lands at Corozal into a global center of excellence for logistics. At the moment, we are facing a difficult situation whereby many of the stakeholders feel we need to build ports. We do not need to build additional ports; we need to ensure that our ports are well connected, efficient, and can handle larger vessels; the focus needs to be on sustainable logistics to drive greater opportunities for industry in Panama. Port capacity does not drive global trade; it is a facilitator.

How is PPC positioned to add value in logistics?

From an efficiency point of view, we have invested USD1.5 billion over the 20-year period during this concession. While ports in the US are all scrambling at the moment to be able to handle large vessels, PPC is already there. We were perceptive and prudent enough to invest early and have the capability to take the world's biggest vessels, even though these cannot go through the canal. Neopanamax vessels with 13,000TEU capacity are the limit that can go through the canal. We can already take 18,000-20,000TEU vessels at PPC. We have the water depth, the outreach on our cranes, the infrastructure, and yard capacity today to handle the vessels of tomorrow. We need to move on as well and create lateral expansion. PPC shall move into logistics and the pressure is on to develop warehousing and supporting activities and see how we can contribute to the new, much needed logistics landscape here. There is a need to look at inventory holding in terms of better inventory management and setting up manufacturing and production. We now have our eyes on a completely different market and this is where Panama will sustain its economic advantage.

What are your priorities at PPC for 2017 in terms of boosting efficiency and expanding the port's operations?

We have the hardware and the infrastructure; now we need to look at labor flexibility. With larger vessels there are naturally more peaks and troughs. Rather than carrying heavy gangs of workers through the troughs we need to be flexible. For example, we need to be able to put six instead of three cranes on large vessels; this requires more personnel and resources at certain high points within the week. We need to be able to flex our capacity up to handle multiple Neopanamax vessels simultaneously. My challenge is to work with our unions and employees to make sure we continue to adjust our business to handle larger vessels with significantly more peaks. I am confident that our investments made shall ensure the future of our port for the next generations to come.