| no comments in Stumpage Forecasting, Wood Demand & Procurement

Forisk Forecast: Expanding the Panama Canal

This is the third in a series related to Forisk’s 2013 forecast of softwood stumpage prices in the United States.

One of the best books I read in 2012 was David McCullough’s The Path Between the Seas about the building of the Panama Canal.  Early in the book, McCullough summarizes the prognosticating efforts of those studying and considering in the 1800s alternatives for slicing a path through the isthmus of Central America at Nicaragua or Panama to connect the seas.  McCullough notes that:

….all the canal projects proposed, every cost estimated, irrespective of the individual or individuals responsible, were hopelessly unrealistic if not preposterous.  Every supposed canal survey made by mid-century was patently flawed by bad assumptions or absurdly inadequate data.  Assertions that the task would be simple were written by fools or by men who either had no appropriate competence or who, if they did, had never laid eyes on a rain forest.

While McCullough falls (just) short of crucifying the analysts and pitchmen of the day, his language quickened my pulse and reminds us all to confirm assumptions on the ground, check data and respect context.  In the end, we must take a position on what’s “doable.”

In December, I visited the Panama Canal.  The largest ships began outgrowing the Canal in the 1980s. In 2007, Panama officially started an expansion project that will add a third lane to the Canal.  Scheduled for completion in 2015, the Panama Canal expansion will allow significantly larger container ships to short-cut the trip from Asia to the East Coast in the U.S. and elsewhere.  A critical limiting issue remains.  Tom Heagle at ASF Logistics highlights how most East Coast ports currently lack the necessary depth and/or maneuvering space and/or suitable cranes and/or docks to handle the enormous ships.

In studying and tracking log and lumber export markets, we model potential implications from the Panama Canal.  In practical terms, 2013 will not be the year the Canal Expansion influences stumpage (or lumber) prices in the United States.  Neither will 2014.  For U.S. stumpage and log forecasts, keys include competitively priced supplies – influenced through imports and exports that may or may not change due to the Expansion – relative to U.S. demand.  The economics of utilizing an expanded Panama Canal fail to qualify as a “no-brainer”; it simply opens a trade-off between total time and total cost.

To learn more about the 2013 Forisk Forecast and its assessment of the economics of the Panama Canal, contact Brooks Mendell at bmendell@forisk.com, 770.725.8447. 

Leave a Reply

← Back to blog