The Strategist

Expansion of the Panama Canal begins to bear fruit

10/13/2017 - 12:47

Expansion of the Panama Canal, which required investments of $ 5.4 billion and took nine years, can be proclaimed justified now, as more and more cargo destined for the United States now pass this route instead of the Suez Canal, writes The Wall Street Journal.

Stan Shebs
Stan Shebs
Since June 2016, the channel’s capacity has more than doubled. Now it can let pass ships of much larger size (New Panamax), containing up to 14,8 thousand containers against 5 thousand containers before the beginning of work.

According to the Panama Canal’s operator, the total tonnage of vessels that crossed it since the beginning of 2017 increased by 23% compared to the same period in 2016. Last week, a new 2000 Panamax class vessel passed through the updated gateways.

"There has been an unprecedented increase in demand driven by expansion of ports on the East Coast of the United States and on the shores of the Gulf of Mexico," said Manuel Benitez, deputy head of the Panama Canal Authority, WSJ writes.

For importers on the East Coast of the United States, including New York, it is now cheaper and faster to deliver goods from Asia through the Panama Canal. Earlier, many of them paid for delivery by ships to the ports of the West Coast, and from there - by rail or road across the whole continent.

In addition, the expansion of the Panama Canal has helped increase LNG shipments from the US to Asia.

"We are using the Panama Canal very actively. This tool in our arsenal increases efficiency of delivering our products from the Atlantic coast to the countries of the Pacific basin," said Cheniere Energy Inc. Chief Commercial Officer. Anatol Feygi.

Cheniere Energy, based in Houston, is one of the largest exporters of LNG from the US. Currently, 42% of its cargoes from the Sabin-Pass LNG terminal in Louisiana pass through the Panama Canal.

The Panama Canal resumed its work on June 26, 2016 after extensive reconstruction and expansion work, which took nearly 10 years. The expansion project was completed two years later than planned due to the repeated failure to meet the construction deadlines, as well as exceeding the cost estimates.

The share of revenues from container transportation accounts for about 50% of total revenue received by ACP.

The Panama Canal, 77 kilometers long, connects the Panama Gulf of the Pacific with the Caribbean Sea and the Atlantic Ocean. Unlike the Suez Canal, it is not laid along the entire length at sea level: vessels are raised and lowered by means of giant sluices at the entrance and exit and pass along a freshwater channel feeding off rivers flowing from the surrounding wooded hills.

The canal was built by the Americans in 1904-1914 (before this unsuccessful attempt was made by the French), and in 1999 it was transferred to the ownership of the Panamanian government. The channel is one of the main sources of income for this country.