Manzanillo, Mexico – Amidst the ongoing trade tensions between China and the U.S., Mexico’s President Claudia Sheinbaum has announced a massive expansion plan for the country’s largest container port, Manzanillo, which is set to quadruple the port’s size and add four new container terminals.
The expansion project, which is expected to be completed by 2030, will develop 1,880 hectares of land in the Bahia de Cuyutlan, an area four times larger than the current port. The goal is to increase the annual throughput to over 10 million TEUs, potentially ranking Manzanillo among the top 15 ports globally and making it the leading port in Latin America.
Current Congestion Crisis: The port is currently grappling with a congestion crisis that has left 17 fully loaded ships from Asia stranded due to poor port management. As of October 17, 2024, 14 vessels, including 10 general cargo ships and 4 container ships, are anchored and waiting to offload their cargo.
Productivity at Manzanillo has been on a decline since 2020, with a significant drop in daily unloading tons over the past 10 months. The dwell time for cargo on a single ship has increased from 48 hours to 168 hours, reducing the port’s dynamic handling capacity from 120,000 tons per month to 30,000 tons.
Economic Impact: The congestion at Manzanillo has had a profound impact on Mexico’s supply chain, with the focus now on restoring operational efficiency to mitigate further economic repercussions. The crisis has led to millions of dollars in economic losses due to prolonged cargo stays and delays.
Resolution Efforts: To address the congestion, Manzanillo and local authorities are planning to improve operational efficiency by extending container appointment times to expedite cargo clearance and increasing dock operating hours by an average of 60 hours.
A second access channel is being constructed in the northern part of the port to alleviate the issue of having only one main artery leading to the container terminal, with the project expected to be completed by March 2024.
Extending customs business hours to a 24-hour operation and implementing digital processes are also being considered to enhance clearance efficiency.
Investment in Infrastructure: The Mexican Navy has announced that it will oversee the expansion of Manzanillo Port between 2024 and 2030, with a total investment of 64 billion Mexican pesos (approximately $3.13 billion), to boost the port’s throughput capacity.
Global Supply Chain Implications: The congestion at Manzanillo poses challenges to the global supply chain, with the risk of supply chain disruption if the port fails to cope effectively. The Asian Feeder Discussion Group (AFDG) members have started to charge an “Emergency Cost Recovery Surcharge” to counter the increased operational costs due to port congestion, leading to a逆 market increase in freight rates during the off-season.
Mexico, as an alternative route amidst the U.S.-China trade friction, has seen a surge in export volumes. However, the port congestion has led to cargo backlogs, affecting global trade flows.
Positive Impacts of Expansion: Upon completion, the Manzanillo Port expansion is expected to have several positive impacts on the local economy, including increased port throughput capacity, job creation, regional efficiency and competitiveness, investment attraction, and a boost to nearshore manufacturing investments. The port’s global ranking is also anticipated to jump from 53rd to 15th, enhancing Mexico’s influence in international trade.
The expansion project is a significant development for Mexico, aiming to elevate Manzanillo’s international competitiveness and potentially exert a positive influence on Mexico’s and the world’s supply chains.