A new report predicts a dramatic shift for ocean shipping after the Panama Canal expansion opens—but not everyone’s aboard.
The expansion of the Panama Canal to accommodate more and larger ocean traffic is going to have a profound effect on the U.S. logistics landscape. But in a system that’s so complex, it’s hard to pin down exactly what we can expect.
That doesn’t stop some from trying: A new study by the Boston Consulting Group projects that the expansion will shift 10% of East Asia container traffic from West Coast ports to the East Coast by 2020. East Coast ports are already steadily gaining shares of that flow, so the total shift between now and 2020 could be more like 15%, leaving a 50/50 balance between the coasts.
Though several analyses of the expansion have been released, this is arguably the most rigorous and comprehensive.
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
The long-delayed expansion of the Panama Canal is now expected to be finished by May, instead of April as was previously announced, Panamanian President Juan Carlos Varela said Saturday. Varela made the announcement in an address to the Central American country.
In the speech, Varela urged the Spanish-led consortium behind the expansion, Grupo Unidos por el Canal de Panama, to focus on completing the project and to leave legal disputes to the “competent authorities,” according to Agence France-Presse. That plea came after an adjudication board ordered the state-run Panama Canal Authority to award the consortium $17 million for budget overruns and extra labor costs.
“I am calling on the contractors for the expansion project to hold dialogue with the Panama Canal Authority, to allow work to be completed, to leave legal disputes in the hands of the competent authorities and to avoid mediatized differences that in no way help the image of the contractors, the Canal Authority and the Republic of Panama, AFP quoted Varela as saying.
Already behind schedule, the project would enable nearly tripling the size of the ships that could pass through the waterway’s existing locks. Work started in 2007 and was expected to be finished by 2014, the centennial of the Panama Canal. The deadline was subsequently pushed back to April 2016, although Varela’s recent comments indicate builders are unlikely to finish the project by then.
The original cost was projected at $5.25 billion, although construction has exceeded that figure.
Jorge Quijano, the CEO of the Panama Canal Authority, said last month the project was 96 percent complete. “An expansion of the Panama Canal has never been done, and we should all feel very good about where we are today,” he said.
Panamanians approved the canal expansion by a wide margin in a 2006 referendum. The project has spurred a number of infrastructure and port upgrades on the U.S. East Coast and throughout the Caribbean region.
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
pstarr wrote:I suppose this is a good thing for Hillary Clinton and the other Globalists. Does this mean its time to invade again?
The Panama Canal's third set of locks will begin commercial operations on June 27, albeit with draft restrictions owing to a severe El Niño-triggered drought, the interoceanic waterway's administrator said Friday.
Jorge Quijano said the inauguration would take place the day before, adding that initially the draft of ships navigating through the new locks and channels will have an upper limit of 41 feet (12.5 meters), less than the maximum draft of 50 feet (15.25 meters) when the canal's lakes are at normal levels.
A ship's draft is the vertical distance between the waterline and the bottom of its hull.
The centerpiece of the canal's expansion program, launched in 2007 with an initial budget of $5.25 billion, the third set of locks will enable the canal to accommodate "New Panamax" ships.
Those modern ships hold up to 13,000 20-foot-long containers and are three times bigger than what the canal can currently handle.
With the draft restrictions, however, those ships will not be able to be filled to capacity.
The date of the official inauguration was pushed back on several occasions due to repairs, strikes and contractual disputes between the Panama Canal Authority, or ACP, and the consortium responsible for building the third set of locks. EFE
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
2016 June 3 13:12
Panama Canal receives report of functional completion of third set of locks.
On Wednesday, June 1, the Panama Canal Authority (ACP) was informed by its contractor Grupo Unidos por el Canal, S.A. (GUPC) that the Third Set of Locks have officially passed all performance tests and are now functionally completed to allow a safe, efficient and reliable operation of the new locks in accordance with the provisions of the contract.
The ACP will conduct a detailed review of the submitted report, in order to proceed with appropriate action and respond to the contractor, symbolizing an important milestone towards the inauguration of the new lane on June 26.
About the Panama Canal;
The Panama Canal is run by an autonomous agency of the Government of Panama in charge of managing, operating and maintaining the Panama Canal. The operation of the Panama Canal Authority (ACP) is based on its organic law and the regulations approved by its Board of Directors.
hvacman wrote:Assuming the US actually exports significant LNG. The expanded domestic use of NG at US power plants to displace coal, decline rate of the current crop of gas wells, and the cost to drill new ones could likely push us further into import mode from Canada.
AP wrote:PANAMA CITY
The $5.25 billion expansion of the Panama canal is set to open Sunday at a difficult moment for the international commercial shipping market.
The drop in world oil prices, an economic slowdown in China and other factors have been affecting the canal's traffic and income.
About a third of the canal's traffic is between U.S. East Coast ports and northern Asian ports. But that cargo traffic dropped 10.2 percent in 2015, and lower oil prices have allowed some shippers to use longer routes. And because of the canal's size limitations, some shippers now go through the Suez Canal.
Canal Administrator Jorge Luis Quijano said Wednesday the shipping market is cyclical and will rebound. There are already 162 reservations for large-ship voyages through the new locks through December, and the new locks are expected to earn between $400 million and $450 million in their first year of operation.
"Things won't stay at zero. The world will continue to grow," Quijano said. "Eventually there will be a rebound and the good thing is that we are prepared to take advantage of that when it occurs."
Quijano said the current economic downturn may last one or two years.
"We believe that the United States will see significant growth in the future for its new export capacity for natural gas and oil," Quijano said. "That is what we are betting on, and that is why I feel so optimistic that the canal will do well."
Canal authorities have been carrying out tests with smaller ships in the lead-up to Sunday's first full passage, and Quijano acknowledged that one lock didn't open correctly.
"What happened was that one lock failed to open but it wasn't a mechanical or electrical problem, but rather a software-control issue," Quiano said.
The expansion will also allow larger ships to pass, increasing efficiency.
The renovations will double the canal's capacity, tap new markets such as liquid natural gas shipments and cut global maritime costs by an estimated $8 billion a year.
WORKERS at a fish market in Panama City disagree on the benefits of the country’s newly widened canal. One optimistically hopes the government will have more funds to pay for air-conditioning in their broiling workplace. Another draws a finger across his throat and says, “The people will get nothing.” A third calls it “the biggest opportunity” in Panama. The last verdict is certainly true of the government’s take. The revenue it receives each year from the Panama Canal Authority (ACP) is expected to double to around $2 billion in 2021. This is a country that knows how to reap the benefits of its geography.
The ACP will be able to charge more for passage to bigger ships now that massive new locks have been built at both the Pacific and Atlantic ends of the canal and channels have been deepened and widened. The $5 billion venture will be inaugurated on June 26th when the first vessel officially sails through. The widening of the canal was initially mooted before the second world war, but became more urgent as ever larger ships were unable to use it.
Over 960m cubic metres of cargo passed through the canal in 2015, a new record and an amount that Francisco Miguez of the ACP calls “the maximum we could do in the existing locks”. The expansion increases capacity to 1.7 billion cubic metres. The biggest container ships that could use the old canal, known as Panamaxes, can carry around 5,000 TEUs (20-foot equivalent units, or a standard shipping container). Neo-Panamaxes that will squeeze through the new locks can carry around 13,000 TEUs. Although the world’s largest ships have space for nearly 20,000 TEUs, the majority of the global fleet will now fit through the canal.
The expansion will not only fill the coffers of the ACP and the Panamanian government. It will also change how freight moves around the world. Traffic could divert from the Suez Canal. Larger vessels, which currently ply that route between Asia and America’s east coast, now have the option of going through Panama. America’s east-coast ports should get busier. In the past, many containers heading from Asia to the eastern seaboard would arrive at west-coast ports, such as Los Angeles and Long Beach, and then travel to their destinations by road or rail. Bigger ships may now sail directly to ports in the Gulf of Mexico or the east coast, though shipping times will be longer. And vessels carrying liquefied natural gas from America’s shale beds will be able to pass through the locks for the first time, heading to Asia. They are expected to account for 20% of cargo by volume by 2020.
East-coast ports are preparing for the windfall, says Mika Vehvilainen of Cargotec, a maker of cargo-handling equipment. Ports in Baltimore, Charleston, Miami, New York and Savannah are updating facilities to accommodate the Neo-Panamaxes. The Port Authority of New York and New Jersey plans to spend $2.7 billion on enlarging its terminals and shipping lanes, and a further $1.3 billion to raise a bridge by 20 metres.
Shipping lines’ costs will also fall, in part through economies of scale but also because ports are automating facilities at the same time as preparing them for Neo-Panamaxes, says Kim Fejfer, boss of APM Terminals, the ports division of Denmark’s Maersk Group, the world’s biggest shipping firm. Ports in the Gulf of Mexico are already embracing these new technologies.
Customers may not, however, benefit much from the reduction in shipping costs. Rates have already fallen over the past two years—by up to 40% for containers on some routes, and slightly less for bulk commodities such as coal. The response, industry consolidation, may mute incentives to pass savings on. Earlier this year China’s two biggest shipping lines merged to form the world’s fourth-largest operator. Firms are also building alliances to manage capacity. In January 2015 Maersk and MSC, the world’s largest shippers, launched 2M, an alliance to share space on their vessels. In May this year, six other shipping lines with a global market share of 18% launched “The Alliance”. There are rumours of a huge tie-up between several medium-sized firms.
Widening the Panama Canal may not bring cool air to sweaty fishmongers. But it should certainly give some parts of the shipping industry a boost. Whether the benefits of lower costs trickle down to consumers will depend on the internal machinations of the shipping industry.
PANAMA CITY, Panama
More than 100 years ago when the SS Ancon sailed into the history books as the first ship to transit the Panama Canal, the waterway was a display of American ingenuity and the Panama Canal Zone was firmly in U.S. hands.
But the ship making the first official trip through the newly expanded canal next Sunday will be a Chinese megaship. The United States completely withdrew from the canal on Dec. 31, 1999, and there was barely any U.S. participation in the $5.5-billion canal project, which will allow the world’s bigger ships to transit Panama’s “highway of the sea.”
The United States remains the most important user of the canal and canal officials say it will be for the foreseeable future, but world trade patterns have shifted in the past century and China has become the world’s largest trading nation.
Between 6 a.m. and 7 a.m. on June 26, China COSCO Shipping’s recently renamed 984-foot-long Panama will approach the new Agua Clara locks on the Atlantic side of the 50-mile long canal to begin the first official voyage through the expanded canal. It won the honor in a drawing among the canal’s top customers.
Although the new locks — tall as an 11-story building — are an engineering marvel and the expansion is expected to double the canal’s capacity, it’s been a long slog. The project is being delivered nearly two years behind schedule and various claims by the Grupo Unidos por El Canal (Group United for the Canal), the international consortium that built the expansion, could push the price for the project even higher. The Panama Canal Authority also has its own counter-claims. Arbitration on the first unresolved claim gets underway in Miami in July.
But now —110-million man hours, 292,000 tons of structural steel, 1.6 million tons of cement and 5 million cubic meters of concrete later —the project is finished. Panamanian voters approved it in a 2006 referendum.
“This is a great project from an engineering and logistical point of view,” said Giuseppe Quarta, chief executive of the consortium.
The project, which got underway in 2007, included deepening and widening the entrances to the canal, widening and deepening the navigational channel through Gatún Lake, deepening the channel at Culebra Cut, raising the level of the lake, building a new 3.8-mile Pacific access channel, and construction of larger Atlantic and Pacific locks that are as long as three Empire State Buildings laid end to end.
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
Subjectivist wrote:It certainly took them long enough, 9 years with 21st century equipment? It hardly took longer than that to do the bulk of the work on the first canal 1904-1914, using a lot of hand labor supplemented with steam shovels.
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