On December 20th, the Panama Canal welcomed the largest capacity vessel to ever navigate the waterway’s expanded locks, which opened for oceangoing traffic in 2016 after nearly a decade of planning and construction. Canal de Panamá reports that Hapag-Lloyd’s Valparaiso Express, a 10,589 TEU Neopanamax containership, was specifically built to take advantage of the greater capacity offered by the expanded waterway. The new locks, which are 70 feet wider and 18 feet deeper than those in the original Canal, can accommodate Neopanamax vessels carrying up to 13,000 to 14,000 TEUS (20-foot equivalent units).
It was a momentous event for the ocean shipping industry and one that was a long-time coming. According to the USA Today, the $5.4 billion effort to expand the 102-year-old canal—which required 40,000 workers to complete—culminated in a new set of locks that now allows ships carrying up to 14,000 containers to cut a quicker path between the Atlantic and Pacific oceans. “U.S. ports have been investing billions of dollars to expand their facilities in a race to accommodate the mega ships,” USA Today reports.
Canal de Panama says that the main objective of the expansion program was to increase capacity to meet demand growth with enhanced customer service. Because it doubles the canal’s capacity, the expansion has a “direct impact on economies of scale and international maritime trade, and will help maintain the canal’s competitiveness and the value of the maritime route through Panama,” the organization states, adding that the expansion has created opportunities and training for professionals in different job fields, with more than 30,000 jobs created as a result of the project.
Open for Business
Open for business since June 26, 2016, the expanded Panama Canal now connects a total of 140 maritime routes and 1,700 ports around the globe, the Washington Times’ Hector V. Barreto points out in Navigating the Panama Canal Expansion.
“The expanded canal is a technological marvel, more efficient and less labor-intensive than the original canal and able to move larger ships at a lower per-unit cost,” Barreto writes, noting that a key element of this technology is the use of tugboats, rather than locomotives, to haul ships through the new locks, “allowing greater flexibility and simplicity, saving energy, and improving operating efficiency.”
Recognized by the American Society of Civil Engineers as one of the seven wonders of the modern world in 1994, the Panama Canal hosted its 1 millionth passing ship in September 2010. The idea of creating a water passage across the Isthmus of Panama to link the Atlantic and Pacific Oceans dates back to at least the 1500s, according to History.com, when King Charles I of Spain tapped his regional governor to survey a route along the Chagres River. The realization of such a route across the mountainous, jungle terrain was deemed impossible at the time, although the idea “remained tantalizing as a potential shortcut from Europe to eastern Asia,” by History.com’s account.
The U.S. commenced building a canal across a 50-mile stretch of the Panama Isthmus in 1904. The project was helped by the elimination of disease-carrying mosquitoes, while chief engineer John Stevens devised innovative techniques and spurred the crucial redesign from a sea level to a lock canal. According to History.com, his successor, Lt. Col. George Washington Goethals, stepped up excavation efforts of a stubborn mountain range and oversaw the building of the dams and locks. Opened in 1914, oversight of the world-famous Panama Canal was transferred from the U.S. to Panama in 1999.
Fast-forward to 2017 and the Panama Canal continues to serve as a vital passage for oceangoing vessels looking for the fastest and safest way to travel back and forth from the Atlantic to the Pacific Oceans. And with its most recent (and long awaited) expansion completed, the Panama Canal’s value proposition for ocean trade should increase exponentially over the next decade (and beyond).
Panama as a Regional Hub
In assessing the short- and long-term impacts of the Panama Canal expansion on ocean trade, Edgar Urrutia, managing director of DB Schenker in Panama says that the expansion is a “big thing” for Panamanians and that the country’s 4 million+ people are all touched by the canal in some way or another. “Not all of them make their living from the canal,” Urrutia points out, “but every one of us lives with it!”
According to Urrutia, the expanded canal was inaugurated in a time of turbulence for the shipping industry. The global economy continues to run in a low gear and there is still overcapacity in the marine business, but he’s convinced that the expanded canal will benefit the carriers, and thus also logistics companies like DB Schenker and their customers.
“The new set of locks basically triples the capacity of the old ones. Therefore, shipping lines will be able to use bigger ships, thus reducing their costs,” Urrutia explains. “And this will also reduce the shipper’s expenditure on logistics.” It will also create more business opportunities, he predicts, with the primary impacts being felt in trade lanes from Asia to the east coast of North America.
“The electronics, apparel, footwear, and fast-moving consumer goods industries will benefit the most,” Urrutia predicts. “Fruits, vegetables, fresh fish, and wine trades coming from South America to the U.S. and to Europe will also profit as they’re able to use bigger ships to transport their dry and reefer containers. Plus there’s new business like shipments of liquid natural gas (LNG) from the Gulf of Mexico to Asia.”
Urrutia expects the expanded waterway to continue playing a crucial role for DB Schenker Panamá, with roughly one-third of shippers using it for their ocean freight.
“It remains to be seen how the expansion will affect business,” he concludes. “I believe that in light of the more cost-efficient transit, the construction of a new port on the Pacific side, and the development of new logistic free trade zones, more business opportunities will open up using Panama as a regional hub.”
