Locks double Panama Canal’s load
Print Edition
WITH a band playing and flags waving, a Chinese ship carrying more than 9,000 containers yesterday entered the newly expanded locks that will double the Panama Canal’s capacity in a multibillion-dollar bet on a bright economic future despite tough times for international shipping.
Several tug boats pulled “Cosco Shipping Panama” into the new locks at Agua Clara under a cloudy sky in Colon province, about 80 kilometers north of the capital.
Thousands of Panamanians who gathered since before dawn to witness the inauguration of the canal’s expansion waved the national flag as the band struck up a song.
Nearly two years late due to construction delays and labor strife, the US$5.25 billion project formally launched with the transit of the 48.2-meter wide, 300-meter long Chinese-owned container ship. It’s one of the modern class of mega-vessels that will now be able to use the canal.
With 30,000 people and eight foreign heads of state expected to attend the daylong festivities, officials are bullish.
“There is evidence that the Panama Canal, with this expansion, is an important player not only for regional maritime commerce but worldwide,” said Oscar Bazan, the Panama Canal Authority’s executive vice president for planning and commercial development. “The canal is a winning bet. (Clients) will benefit from saving not only time but also money, because the canal is a route that shortens distance.”
However, the party comes amid a lull in global shipping due to the drop in oil prices, an economic slowdown in China, which is the canal’s second-largest customer, and other factors that have hit the waterway’s traffic and income.
While authorities anticipate increasing commerce between Asia and ports on the US East Coast, doubts remain that not all those ports are ready to handle the huge New Panamex-class cargo ships. Net cargo volume through the canal from the US East Coast toward Asia fell 10.2 percent in 2015, according to official statistics. Meanwhile the Suez Canal in Egypt recently cut tariffs by up to 65 percent on large container carriers in a bid to keep its traffic.
“It’s important to remember that the canal does not create demand. The canal opens the route. Supply and demand on a world level is what will decide whether the Panama Canal will really bring more volume or not,” said Antonio Dominguez, a general manager for global shipping leader Maersk Line, which moves about 14.2 percent of world commerce. “What is certain is that the current canal has maxed out.”
Maersk was among shipping companies that have reduced passages through the Panama Canal, although Dominguez said the company is considering a return.
Since the canal was handed over from US control at the end of 1999, the waterway has generated about US$10 billion in direct income for the Central American nation and is responsible for about 40 percent of its GDP, factoring in related economic activity. Some 35 to 40 vessels transit the waterway each day, and the canal is estimated to handle about 6 percent of world maritime commerce.
Panama began the expansion nearly 10 years ago. Originally planned to open in late 2014 around the waterway’s centennial, the new locks can host ships that carry up to three times the cargo of those previously able to use the canal.
Grupo Unidos por el Canal, the Italian- and Spanish-led consortium that spearheaded construction, handed the project over on Friday, although a series of claims are still pending for presumed cost overruns of over US$3 billion.
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