The much awaited Panama Canal expansion is set to be operational in the final quarter of next year. This $5.25 billion dollar investment has been predicted to go one of two ways. It is most likely to boost the East and Gulf coast container trade, however, there is speculation surrounding this as certain reports have predicted that the Panama Canal Authorities will be disappointed with the trading figures. Moreover, the opening of the larger docks is already increasing exports. This is due to the coal and grain cargo that is travelling from Asia to the US Gulf ports of LNG.
It is no secret that the Panama Canal industry has suffered greatly due to the changes in the world’s shipping lanes, losing its position to the Asian Suez Route. This has been a direct result of the shift in global sourcing patterns to South and South East Asia. The Chinese Industry is no longer the cheap production house that it once was. Increasing product standards, like those at Shanghai Metal Corporation are a testament to this, but by no means should anyone count China out. It will remain an important source for U.S. manufactured imports because of its modern port infrastructure and efficient logistics. Therefore, the adaption of doubling the canal space is an obvious attempt to resurrect some of the lost trading lines and will help to further the US – Chinese trade relationship.
The evolution of the mega ships was the driving force behind this expansion. The average Panama carry is limited to around 5,000 TEU,s. Whereas this development is set to increase this towards 13,000 TEU’s. This would help to remove the price deficit that has developed between the Suez and Panama. For the average 4,8000 TEU ship from Hong Kong to New York, via Suez, the cost per TEU is $850. For the same ship to travel via Panama it rockets to $1,250.
“The new locks will be a game-changer,” said Oscar Bazan, the canal authority’s marketing manager. “Once the new lane is open, we expect to recapture some of the volumes that have shifted to Suez.” He said U.S. trade with Northeast China will continue to grow, even if trade with Southeast Asia shifts to the Suez route.
There are very positive signs of private investment and development with Panama. It appears that many wealthy investors have put there faith into this project in providing the regeneration that Panama requires. Although spot rates on the two routes are set by the market, lower slot costs on the Suez route enable carriers to offer much more favorable annual contract rates, which are likely to come into play in next year’s trans-Pacific contracts. “Cargo will flow downhill to where cost is the lowest and service is the best,” John Vickerman, president of maritime and port consultant Vickerman & Associates, reminds us. However, the proposed plans for an alternative canal through Nicaragua will certainly pose as an economic threat.
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