Panama Canal may compete with rail rival
February 16, 2011 - SCMR Editorial
Before shippers make too many long-range plans for the Panama Canal expansion, they may wish to consider the threat posed by an alternative “dry canal.”
According to a recent report in The Financial Times, (http://www.ft.com) China is in negotiations over the construction of a 137-mile rail link across Colombia that represents a competitive route. When completed, Chinese exporters could ship finished goods into Latin America while sourcing raw materials for outbound vessel deployment.
The news hardly surprised China analyst Rosemary Coates, who told SCMR that the Chinese have been heavily investing in minerals and mining in the area for several years now.
“The Chinese have also built significant infrastructure – schools, roads, electrical – in exchange for mineral rights,” she said.
Colombia is the world’s fifth largest coal producer, shipping most of its exports through the Atlantic ports despite faster growing demand across the Pacific.
According to The Times, China and Colombia are negotiating over other transport projects, including the construction of a 495-mile railway and expansion of the Pacific port of Buenaventura at a cost of $7.6 billion.
“Obviously this drives the need for economical transportation and logistics where the cost to move such commodities can be up to 50 percent of the product value,” said Coates. “It appears from the article that the purpose of this railway is to move commodities but also for commercial/public freight transportation, which would make this type of investment a double home run.”
Coates, the author of “42 Rules for Sourcing and Manufacturing in China,” noted that China is making similar capital investments in logistical projects in Africa.
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