Costas Paris writes for the Wall Street Journal about the huge success of Panama’s newly expanded canal. I first came to Panama when the vote was put to the people to decide on the expansion and now 10 years later it is over a year old and breaking records.
Panama’s $5 billion investment to expand its century-old canal is paying off as shipping lines send more U.S.-bound cargoes through the passage instead of the Suez Canal.
Ships nearly three times as large as the ones crossing before the expanded locks opened in June of 2016 are bringing tens of millions of additional dollars in tolls and a trading boom to U.S. East Coast ports, allaying some fears that investments to cater to the bigger vessels wouldn’t see enough returns.
Since the start of the year, transiting tonnage at the Panama Canal has increased by nearly 23%, canal executives say. Last week marked the 2,000th transit of a ship that wouldn’t have fit through the old locks.
“It’s an unprecedented increase and demand is driven by the expanded East Coast and U.S. Gulf ports that have been preparing for the new locks,” said Manuel Benitez, the Panama Canal Authority’s deputy administrator.
The widened waterway means importers as far inland as Tennessee could find it cheaper to bring in Asian goods to ports like New York, Savannah, Ga., and Charleston, S.C., rather than move them by rail and truck from West Coast ports, which handle about two-thirds of Asia-to-Americas trade.
The Panama Canal is also helping U.S. exporters of natural gas send bigger loads to Asian markets.
“We are very big users of the Panama Canal,” said Anatol Feygin, chief commercial officer of Cheniere Energy Inc., a major U.S. LNG exporter. “It’s a tool in our arsenal that improves the efficiency of our…deliveries from the Atlantic to the Pacific basin.”
Houston-based Cheniere began exporting liquefied natural gas in February from its Sabine Pass terminal in Louisiana. Before the opening of the new Panama locks, its tankers had to go around the tip of South America to deliver gas to South Korean, Chinese and Japanese clients. It now sends around 42% of Sabine Pass cargoes through the Panama Canal, with the remainder going to other markets.
The new locks took nine years and cost $5.4 billion, paid for with government-backed bank loans. The locks allow vessels moving up to 14,800 containers to cross, while the old locks, which still operate, can only handle ships carrying up to 5,000 containers.
Before the opening of the locks, the isthmus handled a weekly average volume of 53,000 containers, according to marine data provider PR News Service, which is closely followed by the industry. The weekly average in September was 58,000 and much of the increase was from ship diversions from the Suez in Egypt, where weekly capacity from Asia to the U.S. East Coast fell by nearly 18% in September since the locks opened to about 30,400 containers.
Total weekly container volume at East Coast ports is expected to be up 29% at the end of October since the start of the year, because of increasing traffic through Panama and the Suez, according to PR News Service.
Officials at the Suez Canal didn’t respond to requests for comment.
Savannah—the East Coast’s No. 2 container gateway after New York—expects to handle around 10% more cargo this year, double the average growth rate in previous years. Much of the gains have come from bigger ships crossing the Panama Canal, officials said. The ports of New York, Baltimore, Charleston, Virginia and Georgia also have seen a boost in container traffic.