How Widening The Panama Canal Will Effect You!

 

Widening of Panama Canal Will Remake World Trade Patterns

 

This was the headline of a recent article by Tim Johnson in McClatchy Newspapers. I was amazed by some of the information included in the article. (click on photos to view full-size)  I was even more amazed when I realized that I knew practically nothing about the canal, even though I have lived here in Panama for five years (and have visited the canal on several occasion). I thought that many of you might find this information as interesting as I did. It really becomes more important when it sinks in that widening a canal is going to change things worldwide. Just one more example of what an inter-connected world we live in.

 

Some of the facts outlined in the article:

Ports up and down the U.S. Atlantic Seaboard are in a frenzied race to get ready for the larger, slower, more efficient ships that one day will ply the oceans. They are dredging harbors, expanding rail lines, taking a look at port facilities and distribution centers and, in the case of the New York City area, preparing to elevate the roadway on the Bayonne Bridge so that bigger vessels can slip underneath to Newark Harbor.

Since the first ship transited the Panama Canal (Aug. 15, 1914), the roughly 50-mile-long waterway has saved cargo lines the journey around Cape Horn and through the stormy Drake Passage at the southern tip of South America. More than a million ships have transited the canal, and roughly 5 percent of all world trade moves across the isthmus each year.

But the Panama Canal was always constrained by the size of its locks, permitting no vessel longer than 965 feet, wider than 106 feet and with a draft greater than 39 feet to pass through. Ships suitable for the canal became known as Panamax vessels and could carry nearly 5,000 20-foot shipping containers.

When the third lane opens in late 2014, the canal’s capacity will more than double. Ships as long as 1,200 feet and up to 160 feet wide, with drafts as deep as 50 feet, will be able to transit. The largest vessels will carry as many as 13,200 containers, or at least double the dry weight of bulk cargo that can pass through today. Shipyards are seeing a surge in orders for what are called post-Panamax vessels.

The Panama Canal widening will affect inland railway hubs such as Kansas City and ports along the Gulf Coast, because as shipping becomes cheaper, rail lines that handle cargo coming from Asia and take it across the country may notice a slowdown. TA the same time however, it will be a boon for the Midwest Farm Belt as grain exports moving through the Gulf Coast become more competitive in Asia.

More goods will move through Texas ports, too, and motorists are certain to groan at clogged highways. Texas officials in May created a Working Group to figure out how such highways as I-35 between Dallas and San Antonio, which already handles some 200,000 vehicles a day, will cope.

Traffic already is bustling at the canal, too. The number of shipping containers aboard freighters transiting the canal has risen from 200,000 in 1995 to 6.6 million last year.

One problem is some of the ports along the Atlantic Seaboard don’t have channels deep enough to handle such seagoing behemoths. The White House announced in July that it had issued orders to expedite dredging projects to deepen harbors and approaches in Miami, Jacksonville, Fla., Savannah, Ga., Charleston, S.C., and the Port of New York and New Jersey.

"It’s not only about the ports," Aleman said. "It’s the roads, the trains, the distribution centers and actually it’s about jobs."

The widening of the canal will affect trade across Latin America. Very large ships carrying coal from northeastern Colombia and iron ore from Brazil will soon be able to take the raw material to China through Panama more cheaply, giving a boost to those industries and creating jobs. Chilean copper producers will find it easier to export to European markets.

Panama, a diminutive country of 3.5 million people, took a huge risk financing the canal widening. But the payoff will be bountiful. The United States ran the canal as a break-even operation, but once Panama took over in 1999, it increased tolls to make a profit. This year, the canal will contribute $1 billion to Panamanian government coffers. By 2025, projections are for Panama to earn $4 billion a year from the tolls.

With the widening, Panama also hopes to transform itself from just a transit point for cargo into a logistical hub where ships can be overhauled in dry dock, containers sorted for onward passage and industrial parks set up for final assembly of goods.  Already, major multinationals, including Caterpillar, Procter & Gamble, Dell and Mexico’s Cemex have turned to Panama as a headquarters for regional operations.

Panama also boasts five fiber-optic trunk cables, giving it the best digital connectivity in the Western Hemisphere outside the United States. Its airline offers flights to 29 countries, more than any other hub in the region. The nation is bustling as new port complexes are being built on both the Atlantic and Pacific ends of the canal.

On the canal itself, pilots await a new era of mega-ships inching ever so carefully through the locks on the larger third lane. "There are lots of questions about how currents, wind and the hydrodynamics (of the locks) will work," said master towboat Capt. Gerardo Martinez, one of 230 tugboat pilots guiding ships through the canal. The one sure thing, he added, is "the stress will be bigger."

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So in a couple of years, major changes are anticipated and there are probably many more impacts that have not been addressed as yet. Will be interesting to see. I imagine that the first 'super-ship' to transit the canal will really draw a crowd. You may just want to put that on your 2014 calendar!

Larry Matthews

 

Till Next Time. Pura Vida