Even when the work is finished in 2014 it is likely to still be as cheap to take ships around the Cape of Good Hope, as rates are expected to stay depressed, and the improvements to the Canal will still not be enough to let the biggest coal ships through.
Coal traders had expected the canal expansion to boost coal traffic from Colombia to Asia using smaller panamax vessels.
But exporters are likely to cut costs by going around South Africa's Cape of Good Hope using larger 180,000 deadweight ton (dwt) capesize vessels, used mostly for iron ore and coal.
"The canal expansion is largely irrelevant to the flow of coal to Asia especially while capesize freight rates remain so low," said one of Colombia's biggest coal exporters on condition of anonymity.
"Currently and for the foreseeable future, it makes sense to be shipping from Colombia to China in capes and going around Cape Horn."
The expanded canal will also be geared towards containerised shipping -- transporting consumer goods, manufacturing components -- rather than for dry bulkers for commodities including coal.
"The canal is not built for either dry or bulk trades -- it's being expanded for the liner trades," said Sverre Svenning, director of research at ship broker Fearnleys.
North American and Colombian coal exporters started shipping 150,000 ton capesize cargoes to China in 2010 because demand was stagnant in Europe and low freight rates made the long voyage time around Cape Horn economically viable.
Capesize rates have slumped to record lows as mounting fleet growth has battered sentiment with ship supply outpacing commodity demand.
Average daily capesize earnings have fallen to below $5,000 a day this year compared with high of over $230,000 a day in mid 2008 before economic turmoil took its toll. Average capesize earnings reached $10,275 a day last week, barely covering operating costs, estimated around $8,000 to $10,000 a day.
"A reduction in voyage time by using the Canal wouldn't make much difference to costs, and it's not clear yet what size vessels can use the canal," the Colombian exporter said.
"Colombia will continue to see Europe as the key market for coal but increased production will also be targeted at Asia, when it makes sense," he added.
Asia's hunger for long-haul imported coal, led by China, has drawn in steam coal for power generation and coking coal for steelmaking from almost every producing country.
China imported a record 165 million tonnes of coal in 2010, of which around 10 million tonnes came from Canada and the U.S. and around 4 million from Colombia, official customs data showed.
New Ship Class
The main beneficiaries of the new improved canal are likely to be a new breed of shallow drafted post panamaxes of 90,000 to 120,000 dwt, which have been designed specifically to maximise vessels cargo capacity for canal transits, shipping and coal market sources said.
"These 90,000-115,000 tonnes vessels are very hard to place at the moment and the assumption is that they'll be used primarily for traffic through the canal. They're broader in the beam, quite shallow," one senior shipping source said.
The expanded canal will more directly benefit owners who have struggled to find uses for post panamax vessels which could carry more coal to Chile, Mexico and Peru, which are all increasing coal imports, or to Japan and South Korea when the capesize market is tight.
Ship and coal industry sources said the transit draft limit, which will be boosted to 15 metres from 12 metres as part of canal expansion, still meant fully loaded capesize vessels at over 18 metres draft would not be able pass through the canal.
"Such tonnage gets no benefit as it would have to cut cargo size dramatically or offload and reload at each end which would kill the economics," said Nigel Prentis, head of research, consulting & advisory with
