Drewry: Cuba’s Mariel Terminal Could Become Caribbean Transhipment Hub

The new Mariel container terminal in Cuba stands to benefit from thawing relations with the US that could help realise the country’s potential as a regional transhipment hub, according to the UK-based shipping consultant Drewry.

Cuba trades with other countries than the US so Mariel’s future is not completely dependent on the ending of the trade embargo, but the magnitude of its expansion is intrinsically linked to a political solution being found. The potential for Cuba to develop manufacturing exports, and also over time imports as a wealthier middle class Cuban society develops, is huge, says Drewry.

The Container Terminal SA Mariel (TC Mariel) was opened in January 2014 having been built and largely financed by Brazilian money, with Singapore-based PSA International the contracted manager of the terminal without any equity stake. Ownership rests with state-run Almacenes Universales S.A. (AUSA).

In return for its money, Cuba has agreed to spend at least USD 800 million on Brazilian goods and services and to give Brazilian firms space in the 465-square-kilometre Special Development Zone Mariel (ZEDM).

Mariel’s access channel dredging is to be complete in early July and will allow the arrival of Panamax vessels up to 300 meters in length. The dredging program will then continue to a final draft of 18 meters, enabling the port to handle the ”New Panamax” ships of 12-13,000 TEU to coincide with the new Panama Canal locks opening next year.

In 2014 the terminal handled 230,000 TEU and is projecting that figure will rise to 260,000 TEU this year. The shift of cargo from Havana port, unable to be dredged any deeper because of a tunnel under the mouth of the port’s approach channel and soon to become a tourist facility only, will also help, says Drewry. That is only small beer to what TC Mariel’s managers have designs on – becoming a regional transhipment hub and a thriving free trade zone.

The key to realising that dream is the end of the US trade embargo as any ship that calls at Cuba (excluding those carrying US licenced products) cannot then call at American ports for six months, therefore limiting the markets Mariel can serve.

Cuba has a lot going for it. Its proximity to the North and South American markets is an obvious plus but perhaps more so is its well-educated but low-cost workers, most of whom take home less than USD 30 each month. Cheap land and low taxes will also act as a catalyst, but perhaps most important is the need to convince potential investors that Cuba’s legal and institutional structures will not work against them.

Cuba does have potential to act as a transhipment hub for US cargo, in a similar way to how Freeport, Bahamas does now. The new terminal at Mariel has deep water and modern facilities, although in order to gain the critical mass necessary to be a viable hub, it would likely need more than its initial 800,000 TEU p.a. maximum capacity. There is potential to extend the quay length to 2,400 meters and increase the annual lifting capacity to over 3 million TEU says Drewry.

Mariel will have to compete with several well established transhipment hubs in the Caribbean region such as those in Panama, Jamaica and the Dominican Republic, and they all also have the advantage of being on, or closer to, the main East-West and North-South shipping lanes, which is where a thriving special economic zone can help Mariel bridge the gap.

In addition, a number of ports on the US East and Gulf coasts are themselves gearing up to handle direct calls by larger container ships transiting the Panama Canal post-expansion and will be competing hard against neighbouring transhipment options, says Drewry.

Clearly, much depends on continued diplomatic progress but there are other trade barriers that need to be removed if containers are to travel freely between the two countries in a post-embargo world. These include opening up lines of credit to Cuban importers who currently have to pay for US goods in advance in cash.

The end of the trade embargo is in view although it’s difficult to pin down a timeline. Drewry expects foreign (non-US) manufacturers to move into Mariel’s special economic zone in the expectation of a trade bonanza when it finally happens.

The establishment of Mariel as a pure transhipment hub is likely to be a longer term, more challenging ambition but would be helped by a thriving SEZ.

Source: Drewry; Image: Odebrecht