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Issue #590 | Perishables | Mediterranean | Middle East | Africa Trade

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Mediterranean | Middle East | Africa Trade

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2014 Media Kit
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Panama Canal expansion presents significant challenges

By: | at 08:00 PM | Breakbulk & Projects  

Proposal enjoys widespread industry support, but Panamanian people must first decide

By Peter A. Buxbaum, AJOT

The Panama Canal Authority officially announced its plans to expand the canal a couple of months ago and immediately embarked on a public relations campaign to secure world support. Panamanian government and canal officials could be seen frequenting world capitals and shipping centers, talking up the merits of the multi-billion dollar project.

The proposal has met with widespread support and praise from many quarters, including carriers, shippers, and ports. Supporters note that the present canal is reaching maximum capacity, that it cannot accommodate the larger ships that are increasingly plying the waters of global trade, and that logistics demands that more Asian goods enter the U.S. through east coast ports, a possibility afforded by the all-water route through the canal.

However, these same arguments reveal that a canal expansion will be no panacea. Any canal expansion project will not be open for business until at least 2015. In the meantime, the stress on west coast ports will continue to increase. Furthermore, any further significant diversion of Asian imports to east coast ports will require significant infrastructure improvements.

When Samuel Lewis Navarro, Panama’s vice president and foreign affairs minister spoke before an audience at the Center for Strategic and International Studies in Washington last month, he stressed the need to enhance the canal’s capacity as well as the benefits such a project will to Panama and to international trade.

‘Post-Panamax ships cannot fit in the canal,’ Lewis said. ‘Global demand is shifting toward post-Panamax vessels of 4,500 teus or greater. By 2012 the canal will reached maximum capacity.’

The canal authority spent $40 million on studies which, according to Lewis, concluded that the expansion project was economically, environmentally, and socially responsible. The proposed project consists of three components. A third set of locks will provide capacity for post-Panamax ships up to 1,200 feet long. New channels and deepened existing channels will provide fifty-foot depths for the larger ships. Finally, the maximum level of Lake Gatun will be elevated.

‘The expansion will enable the canal to carry twice the tonnage of the current canal,’ said Lewis. ‘Even through the new locks will be bigger, they will use seven percent less water than the existing smaller locks.’

Lewis described the canal project as part of a broader national development strategy that would see exports triple by 2025 and add two to three percentage points to Panamanian gross domestic product each year during the same period. Lewis estimated the project will cost $5.25 billion.

Lewis said the reaction to the canal expansion project has been uniformly positive. A high-level Panamanian government delegation to the Port of Houston in May brought accolades from Thomas Kornegay, the port’s executive director.

“The benefits of a Canal expansion to the Port of Houston are many,’ he said. ‘It would allow for Houston to compete with East Coast ports, handling the same larger and wider vessels. And, it would help continue the port’s economic growth.’

Captain Wei Jiafu, President and CEO of China Ocean Shipping Company, also recently endorsed the potential Panama Canal expansion. ‘I fully support this expansion plan,’ he said. ‘It will ensure Panama’s position as the regional maritime center’ and ‘will also benefit the growth of regional and world trade.’

The Waterfront Coalition, a group representing carriers, shippers and port operators, made expansion of the Panama Canal one of the cornerstone’s of the program it is pushing to modernize the national container transportation system. ‘Immediate expansion of the Panama Canal should be a high priority,’ a coalition document stated.

Straining prior to expansion

According to Lewis, ‘A big question mark in analyses of world trade has been, ‘What is Panama going to do in orde