SPECIAL REPORT: Port Construction

Last Updated on 30 January 2019

Is this a bubble waiting to burst?

Overcapacity may spell the end of port construction bonanza

By Gary Gimson

This decade has been a story of expansion, modernisation and development for Caribbean ports and the region has become a key market for the world’s big harbor construction firms and dredging companies.

In fact, the Caribbean has undergone a port construction boom – but a boom whose days may be numbered. As post-panamax upgrading draws to an end and global trade eases, the prospect of overcapacity – especially in the container transhipment sector – looms large.

Leading

Almost everywhere across the region, harbor construction work is under way or close to completion. Arguably leading the way this year is the opening by ATM Terminals in February of the new billion-dollar Moin megaport in Costa Rica. Then there’s the planned US$ 200 million expansion of Cartagena Container Terminal by operator Compas SA. Meanwhile, work has begun on new ports, upgrades and expansions in Antigua, Panama and Jamaica. Together with proposed upgrades to many of Florida’s ports, it adds up an impressive list of major port construction projects.

As elsewhere in the world, Chinese investors have been scouting our region in search of opportunities for port and terminal development. And, after a slow and ignominious start, projects are starting to take shape.

One of the ideas broached by the Chinese – the transisthmus Nicaragua Canal project – was effectively a non-starter. And the Chinese were in Jamaica to back the US$ 1.5 billion Goat Island project that never was.

Nevertheless, the China Harbour Engineering Company (CHEC) has its regional head office in Jamaica and it was the CHEC which actually built the toll road between Kingston and Ocho Rios. However, in spite of picking up non-marine contracts and having a strong regional presence, the CHEC’s actual port construction projects have been rather thin on the ground. There has been the construction of the US$ 33.4 million North Abaco Port in The Bahamas, funded by the Exim Bank; some harbor work in Exuma; and that has been about it.

port construction

The CHEC is believed to be a bidder for the construction of a controversial new cruise terminal in George Town, Grand Cayman, but there is no guarantee that this scheme will actually go ahead. The Chinese firm had previously put forward the idea of a new terminal on the island.

Contracts

But the CHEC is not the only Chinese port construction firm winning contracts or proposing mega-projects. In Panama, for example, the 2.5 million teu Panama Colon Container Port (PCCP), on which work commenced in mid 2018, is being built by the privately held Shandong-based Landbridge Group and others. The post panamax capacity project is valued at US$ 1.1 billion.

Then, in January, the Antigua government gave the go-ahead for a US$ 90 million modernisation of St John’s deepwater port. This project will be the single largest public sector investment undertaken by any government on the island and it is being carried out by the China Civil Engineering Construction Corporation (CCECC). A further US$ 80 million is being invested to construct a fifth cruise berth at Point Wharf to accommodate Oasis-class ships in time for the 2019-20 season. Exim Bank has provided a US$ 100 million loan to help finance the projects.

Partner

By contrast, in Jamaica the French firm VINCI Construction Grands Projets and Belgian dredging partner Jan De Nul are busy reclaiming 50,000 square meters of land to create space for the expansion of the CMA CGM-run Kingston Freeport Terminal.

In addition to mainstream port construction work, there is a slew of new cruise terminals – not exactly harbors but requiring dredging and such like. Many of these are owned and funded by cruise companies and located on private islands. Among those under way or planned are: Ocean Cay (MSC), Grand Bahama (Carnival) and Lighthouse Point (Disney). Ocean Cay, which had previously been earmarked as the location of an LNG terminal, is due to open in November this year. The destination will be known as the Ocean Cay MSC Marine Reserve.

Disney has purchased the 749-acre Lighthouse Point property at the tip of South Eleuthera for its second private cruise destination and aims to build a new cruise pier and associated infrastructure. Work has yet to get under way, however.

These are being financed in a variety of ways, but largely and directly via the financial muscle of the cruise operators concerned.

In the United States, Port Canaveral has been busy on a contract worth nearly US$ 80 million to expand its cruise facilities on behalf of Carnival and to provide more long-term car parking for passengers in an additional project worth US$ 29.53 million. This is the largest single construction project in the port’s history.

Project

Across Florida on the Gulf coast, Port Tampa Bay has embarked on a US$ 64 million project to deepen and widen its Big Bend Channel to allow larger ships to call. The channel will be widened from 200 to 250 ft while depth will be increased from 34 to 43 ft. The dredging scheme is expected to be completed in April with navaids to be installed in the months after that. The project is being funded with support from the US Army Corps of Engineers, the Florida Department of Transportation, Port Tampa Bay and two of the port’s largest tenants, Mosaic and Tampa Electric. Illinois-based Great Lakes Dredge & Dock is undertaking the dredging element of the project in a contract worth US$ 47.9 million.

Each of these projects may well make sound commercial sense on its own; but, collectively, can the Caribbean region sustain this activity – especially amid growing fears over the slowing pace of global trade? This is the question that needs to be answered; otherwise, there is a danger that some recent projects may not quite provide the return on investment that was once envisaged.