The Panama Canal Expands

The Panama Canal Expands

The giant Panama Canal expansion opens June 26 amid much fanfare and one of the worst shipping industry slumps ever. While it won’t do anything to help the dire state of the industry near-term, the changes are critical to Western trade in the long run. 

The canal, which handles about a third of Asia-to-Americas trade, had no choice but to expand. As the industry copes with its downturn, major shipping companies are pooling their resources and using fewer but much bigger ships—ones that are too large to fit through the pre-expansion Panama Canal.

 The nine-year, $5.4 billion expansion more than doubles the canal’s cargo capacity. A third lane has been added to the canal that accommodates ships large enough to carry up to 14,000 containers, compared with around 5,000 currently. This alleviates a cargo bottleneck caused by the smaller ships that was due to get worse over time.

The expansion makes the Panama Canal more competitive with the Suez Canal in Egypt, shortening the one-way journey by sea from Asia to the U.S. East Coast by roughly five days and eliminating the need for a trip around Cape Horn to get to the Atlantic.

It is expected to shift about 10% of the Asia-to-U.S. container traffic from West Coast ports to East Coast terminals by 2020, according to a recent report by global business adviser Boston Consulting Group and supply-chain management provider C.H. Robinson Worldwide Inc. So far, 136 ships that wouldn’t have fit through the pre-expansion canal have made reservations to follow.

China COSCO Shipping has won the draw for the first transit through the Expanded Panama Canal during the waterway’s inauguration on Sunday, June 26. The shipping line’s container vessel Andronikos will be making the inaugural transit. The vessel, which has a maximum capacity of 9,400 TEUs, is 8.25 meters in beam and 299.98 meters in length.

At the opening ceremony there will be dozens of international delegates and over 40 thousand spectators.

In addition, more than 100 Neopanamax ships have already made reservations for commercial transit through the new locks, which will begin on June 27, 2016, following the historic inauguration.

 


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