Expansion of the Panama Canal is now 93% complete, Manuelo Eduardo Benitez, deputy administrator of the Panama Canal Authority, told an audience at the South Carolina International Trade Conference, sponsored by the South Carolina Ports Authority.

“We are in the last stretch,” he said. “Many of the components of this programme have been completed.” Benitez said the Pacific and Atlantic entrances have both been completed, and many other components are nearly so, including the deepening and widening of the navigation channel, and increasing the elevation of the lake, which will be filled by Panama’s rainy season, which typically runs until mid-December.

“The main element we are finishing up is the locks project itself,” he said.

Benitez acknowledged that the finished canal will not be able to accommodate a small number of vessels, which is one reason often cited for the proposed US$50 billion construction of a canal across nearby Nicaragua by the private Hong Kong Nicaragua Canal Development Group (HKND). Nicaragua’s National Assembly approved a bill to grant a 50-year concession to HKND, which has said construction of the ports and locks would begin before the end of 2015, and that the project would be completed by 2020.

For a variety of reasons, including environmental and social concerns raised by the prospect of digging the 286-kilometre canal, many are skeptical that the Nicaragua Canal will ever be built. Perhaps most common, analysts say, is that there is insufficient traffic for a canal which would be built so close to Panama. (The Panama Canal, by comparison, is just 80 kilometres from coast to coast.)

“Many people in Nicaragua say the expanded Panama Canal cannot cater to these large ships, so we’re going to build a canal to compete with the Panama Canal,” Benitez says. “Of the entire world fleet of ships, in 2014, there’s only 1.5% that are above the future Panama Canal capacity. That’s a small number. In 2018, there will only be 3.2% of the world fleet that will not be able to transit the Panama Canal. In terms of numbers, it doesn’t make sense to build a canal with the capacity to handle the entire world fleet.”

If the Nicaragua canal is built, Benitez acknowledges that it would provide stiff competition to Panama. “I wouldn’t say it is impossible, but it doesn’t make economic sense. We are keeping a close [watch] on that programme, because if it ever gets built, it will be competition for Panama.”

Benitez said the Canal Authority expects the expansion of the canal to bring about a redeploying and reassessing of network operations.

“One of the main attractions of Panama is its location,” he said, noting that he expects shipping lines will want to send larger ships to Panama and use its ports for transhipment hub. “Ships can come mainly from northeast Asia with cargo bound for the United States East Coast and for South America to fill the ship, and then unload in Panama cargo that is going for the rest of Latin America, [such as] the west coast of South America, and then pick up cargo from these locations that is bound for the US East Coast, effectively double-dipping.”

Benitez says that the authority is initially expecting to see ships in the 9,000 to 10,000 TEU size bound for the US East Coast, noting that US West Coast ports already see that size of ships.

Philip Damas, director – supply chain advisors at Drewry Shipping Consultants, said at a later presentation that current Asia-US East Coast and US Gulf Coast lines see 16 weekly sailings averaging 4,600 TEUs per ship. He expects that upon completion of the canal’s expansion the number of sailings between Asia and the US will likely decrease slightly – “there’s lots of duplication [of routes] now,” he said, citing Shanghai-New York as a route which would benefit from route rationalization – but that the average ship size would increase by some 40%.

Two ocean carrier representatives, speaking at a later session, reacted to the canal expansion, saying it will likely change their company’s sailings, though not immediately. “There will be new opportunities, [but] it will not be a big bang with an armada of 15,000 TEU ships arriving at United States ports,” said Wolfgang Freese, president of Hapag-Lloyd Americas. “I see a lot of opportunities for all carriers, but decisions will not be made immediately.”

Jurgen Pump, senior vice president, Hamburg Sud North America, also expects to see a gradual upgrade of service through the canal. He predicted that his company would use the expansion to first upgrade its Europe to South America West Coast sailings. “It will be a process rather than a wholesale change of our networks. It’s very expensive, and we have to see a demand [for larger ships],” he said.

Like ports on the US East Coast, other ports near the canal are also preparing for larger ships. Benitez told his audience that Colombia has been expanding its ports, including the purchase of five post-Panamax cranes for its Cartagena port. “There are no post-Panamax ships going to Cartagena, but they are preparing for the future when these large ships can cross the Panama Canal,” he said. 

By Gregory Glass

Asia Cargo News | Charleston, South Carolina