09/27/2016

The Panama Canal – Testing The Waters of Expansion

Reading Time: 2 minutes
panama canal

The 50-mile span of the Panama Canal connects the Pacific and Atlantic oceans, which has shortened shipping duration between countries and continents1. Since its opening in 1914, the canal has undergone many improvements, ranging from installation of mooring systems to the upgrading of the canal’s navigation and vessel tracking system. One of the largest improvements to date has been the recent expansion of the canal that officially completed on June 26, 2016.

Expanding Opportunities

The Panama Canal expansion was a large investment that spanned over many years. The expansion of the canal has increased the allowed size of vessels that could adequately make it through its waterway by 70%2. Larger ships, containing more capacity, can now allow shippers to decrease the number of vessels used to transfer the same amount of cargo. Many predicted that the additional cargo being unloaded in a shorter amount of time could lead to more congestion at the ports. In response, logistics providers and ports have planned to improve their port operations. The predicted addition of volume at the ports has made many states improve their infrastructure to support the growth. The areas surrounding the ports have also gained popularity, which is evident in lower vacancy rates and growth in intermodal demand within these areas.

Initial Performance On The Canal

On the day that the expansion opened there were 170 reservations already made on limited conditions of four neopanamax ships per day to begin4. Since the inauguration, there have been over 300 reservations with numbers growing daily as shippers see successful operations utilize this mode5. As of September 8, more than 160 container vessels have made their way through the expanded canal. Vessels utilizing the canal have included container ships, liquefied petroleum gas (LPG) carriers, vehicle carriers, oil tankers and a new market segment for the canal, liquefied natural gas (LNG) carriers3. The opening of the canal enables access for 97% of container vessels worldwide5.

Expected Expansion In Popularity

Although the Panama Canal’s expansion has only been functioning for a few months, the supply chain industry has been impressed with performance so far. In 1999, the Panama Canal had 228 million tons of cargo pass through, and this past year there was a record-breaking 340.8 million tons transported through the canal. That record is expected to shatter. Within the next five years that tonnage is expected to exceed over 524 million tons6.

Panama Canal Tonnage - NFI

The Panama Canal will continue to make reservations and efficiently move freight through its waterway. As technology improves, we can expect the canal to continue to undergo maintenance to continue to improve the shipping process.

Sources

  1. http://www.ccjdigital.com/panamas-big-bet-part-1-canal-expansion-details/
  2. http://www.ttnews.com/gateclient/premiumstorylogin.aspx?storyid=42486
  3. https://www.ajot.com/news/fitch-ratings-affirms-panama-canals-a-ratings
  4. http://www.americanshipper.com/main/news/special-coverage-panama-canals-transit-to-the-futu-64687.aspx?source=SpecialCoverageTwo
  5. http://www.huffingtonpost.com/ing-jorge-l-quijano/the-great-connection-the-_b_11527776.html
  6. http://www.globaltrademag.com/global-logistics/ocean-carriers/panama-canal-celebrates-102nd-anniversary