Panama Canal expansion opens new shipping channels

March 3, 2017

The Panama Canal is one of humanity’s great achievements, a project that involved splitting two continents to ensure a more efficient passage for the world’s transport ships. However, the original canal was built over 100 years ago, which means it’s no longer a modern, up-to-date piece of engineering.

As international freight has picked up and cargo and cruise ships have grown larger, the canal has become closer to reaching capacity, with an article from History.com finding that as many as 14,000 ships pass through its locks each year. So, how will an upgrade in capacity affect the world’s shipping channels?

What was the expansion’s aim?

For a ship to pass through the canal, it has to be lifted above sea level by a set of locks. Before this latest expansion, the locks were 110 feet wide, which limited the shipping traffic to Panamax class vessels, those that are designed specifically to pass through the canal. The problem stems from the fact that the world’s largest cargo ships are much wider than what these locks could previously handle. For example, the Triple-E class ships built by Maersk are 194 feet wide, not far off double what the old locks could handle.

However, these ships will still be unable to traverse the canal, even with the larger set of locks being installed, which will be 180 feet wide. Rather than replace the two existing sets of locks, this new set creates a third lane so larger ships can travel through the Panama Canal without holding up the existing ship traffic.

Cargo capacity is measured Twenty-Foot Equivalent Units (TEU), which refers to the capacity in an unusual 20 feet long by eight feet high shipping container. Before the expansion, the Panama Canal’s capacity per ship was limited to around 5,000 TEUs due to its inability to support vessels wider than 110 feet. With the expanded locks, it’s estimated that the new third lane will allow for ships with a maximum capacity of up to 14,000 TEUs to pass through.

How will this impact shipping in the region?

One of the major predictions for how the shipping world will react to a wider Panama Canal involves the transportation of containers through the US. A review of the expansion published by JOC.com notes that many services have moved to upgrade the vessels they use – especially those travelling from Asia to the US East Coast – now that the new locks have been installed.

Previously, shipping services destined for the US East Coast that left from China were limited with the past set of locks, leading providers to either send goods to the West Coast to meet up with an alternate form of transport or simply rely on smaller vessels. According to Head of Industrial Research in the Americas for CBRE David Egan, this shift in focus will prompt many new ports to undertake major developments to meet rising demand.

“[It] marks a fundamental shift in the shipment of Asian goods to the Eastern U.S.” he began. “The short term won’t bring massive, game-changing gains for East Coast ports, because much of that repositioning already occurred in recent years, but it will shift U.S. cargo from slightly favouring the West Coast to a more even split between the two coasts.”

An article from The Economist noted it won’t just be imports to the US that will benefit from these changes, but exports too. Ships carrying liquefied natural gas from the US to China can now pass through the Panama Canal, and could account for 20 per cent of all cargo passing through it by 2020. There are also predictions which suggest the Suez Canal may see less traffic comparatively.

The expanded Panama Canal is the latest development in a shipping industry that continues to evolve, reinforcing how important it is to stay on top of these changes and what they mean for moving goods across the world.

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