Well, it is finally happening on Sunday, the grand opening of the newly expanded Panama Canal.  Dignitaries from around the world will be here to celebrate and all of Panama will be celebrating too.  It is a moment to be proud of and I am so happy that I chose to return to the land of my birth in 2006 to see the upcoming vote and watch the ground breaking.  I have been here for 10 years now and I get to see the final results of billions of dollars invested and a lot of effort from so many people.  God Bless the day!!

Here is yet another report from the Wall Street Journal.

he giant Panama Canal expansion opens June 26 amid much fanfare and one of the worst shipping industry slumps ever. While it won’t do anything to help the dire state of the industry near-term, the changes are critical to Western trade in the long run.

The canal, which handles about a third of Asia-to-Americas trade, had no choice but to expand. As the industry copes with its downturn, major shipping companies are pooling their resources and using fewer but much bigger ships—ones that are too large to fit through the pre-expansion Panama Canal
The Panama Canal’s New Expansion, Explained
The Panama Canal can now accommodate vessels that are longer, wider and heavier than before, thanks to an expansion that was nine years in the making. The face-lift was crucial to compete in a world where ships are getting bigger and bigger. Illustration: Heather Seidel for The Wall Street Journal

The nine-year, $5.4 billion expansion more than doubles the canal’s cargo capacity. A third lane has been added to the canal that accommodates ships large enough to carry up to 14,000 containers, compared with around 5,000 currently. This alleviates a cargo bottleneck caused by the smaller ships that was due to get worse over time.

The expansion makes the Panama Canal more competitive with the Suez Canal in Egypt, shortening the one-way journey by sea from Asia to the U.S. East Coast by roughly five days and eliminating the need for a trip around Cape Horn to get to the Atlantic.

It is expected to shift about 10% of the Asia-to-U.S. container traffic from West Coast ports to East Coast terminals by 2020, according to a recent report by global business adviser Boston Consulting Group and supply-chain management provider C.H. Robinson Worldwide Inc. So far, 136 ships that wouldn’t have fit through the pre-expansion canal have made reservations to follow.

But the expansion isn’t a panacea for the shipping industry. And it doesn’t guarantee a payoff for all the East Coast ports and other businesses that have poured billions of dollars into expansion and infrastructure along the East Coast in hopes of profiting from the larger vessels and extra cargo. The American Association of Port Authorities says close to $155 billion will be invested by 2020 to expand U.S. ports to handle bigger ships. South American terminals are also in an expansion race.

And while some East Coast ports—Baltimore, Miami and Norfolk, Va.—are ready to accommodate much bigger ships, others aren’t, according to Paul Bingham, a port economist with EDR Group Inc. Dredging projects are still under way at the ports of Savannah, Ga., and Charleston, S.C., and the tidal channel on the Savannah River has only received approval to be deepened to 47 feet—not the 50 feet required for the canal’s largest ships.

 

Some of the ports lack infrastructure such as cranes and docking space to handle the ships. At the port of New York and New Jersey, the three largest terminals are walled off to the largest container ships by the Bayonne Bridge, which the local port authority is raising by more than 60 feet at a cost of more than $1.3 billion.

However, bigger ships don’t necessarily translate into more cargo. “It’s a common mistake to think that if you build up a port, traffic will come,” said Asaf Ashar, a port infrastructure expert and professor emeritus at the University of New Orleans. “It’s not like suddenly we lift the bridge and people are buying more tennis shoes.”

Though ship transits through the Panama Canal rose 3.7% last year compared with a rise of less than 1% the year before, the increase in cargo volumes slowed to less than 1% from about 7% the prior year.

Expansion was a must if the Panama Canal was to continue to play its key role in global trade. In the shipping industry, supply exceeds demand by about 30% and freight rates barely cover fuel costs. In the move to bigger and more efficient ships, many of the smaller ships that were tailor-made for the Panama Canal are expected to soon become obsolete. The Panama Canal had to expand to continue to expedite trade to the U.S. East Coast, to lessen cost for shippers and, over time, take pressure off West Coast ports.

Some 6% of global trade in terms of capacity, or 340 million tons of goods, passed through the canal last year. Still, it has lost 10% to 15% of annual revenue to the Suez Canal over the past three years, according to canal executives. To complete the expansion, Panama Canal operators procured $2.3 billion from lenders in Japan, Europe and the Americas.

Oscar Bazán, the Panama Canal’s executive vice president for planning and business development, anticipates a 16% to 17% revenue increase next year.
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The bigger ships are expected to move through the canal substantially more refrigerated cargo from South America, like fresh produce, fish and meat, to East Coast ports, according to Basil Karatzas, of New York-based Karatzas Maritime Advisors & Co.

They are also poised to capitalize on the surge in U.S. natural-gas output and the interest in new export markets including Japan, South Korea, India and China. By 2020, Mr. Bazán said he expects liquid natural gas to be one of the main products transported through the canal.

As of now, only one facility— Cheniere Energy Inc. ’s Sabine Pass terminal, in Cameron Parish, La.—is capable of processing natural gas for export from the Gulf of Mexico.

“What the Panama Canal does more than anything is it contributes to the LNG market becoming more of a global market,” said Octavio Simões, president of Sempra LNG & Midstream, a unit of Sempra Energy.
The first trial run with a Post-Panamax cargo ship in the new sets of locks on the Atlantic side of the Panama Canal, on June 9, 2016.
The first trial run with a Post-Panamax cargo ship in the new sets of locks on the Atlantic side of the Panama Canal, on June 9, 2016. Photo: carlos jasso/Reuters

The expansion won’t solve all of the Panama Canal’s challenges. The canal still won’t be able to handle the very biggest container ships, which move up to 20,000 containers.

The expansion’s launch date was delayed by two years because of cost overruns, leaky locks and labor disputes, in contrast to the Suez Canal, where work for a new channel was completed on time and in only 12 months.

Earlier this month the Suez Canal cut its tolls by up to 65% for certain trades—including routes from Asia to the U.S. East Coast. “It’s a price action directly aimed at competing more effectively with the expanded Panama Canal,” said Lars Jensen, CEO of Copenhagen-based SeaIntelligence Consulting.

A Timeline of the Panama Canal

The U.S. Senate votes to accept the Hay-Bunau-Varilla Treaty giving the U.S. control of a 10-mile strip of land to build the Panama Canal in exchange for $10 million and annual rent of $250,000. Construction begins. Photo: AP

U.S. President Theodore Roosevelt visits Panama and Puerto Rico for 17 days to check on the construction of the canal, becoming the first sitting president to make an official visit outside the U.S. Photo of President Roosevelt at Culebra Cut during Panama Canal construction.Photo: Zuma Press

The Panama Canal under construction looking north at Gatun upper locks and forebay.Photo: AP

The SS Ancon becomes the first ship to transit after the canal officially opens to traffic. Photo: Getty Images
An avalanche at Gaillard Cut closes the canal for seven months.

Four U.S. Navy submarines in the Gatun locks in the Panama Canal. Photo: Zuma Press
More than 5,000 ships transit the canal, almost equal to the transits through the Suez Canal.
Panama breaks ties with the U.S. and demands renegotiation of the Canal treaty after violent anti-U.S. riots break out.

At night in 1968. Night lighting was added to the Panama Canal and nighttime transits inaugurated in 1966. Photo: Zuma Press

The United States and Panama sign new treaties by which the U.S. will eventually hand over control of the canal to Panama.Photo: Getty Images

Aerial view of the Panama Canal in 1978.Photo: Getty Images
President George H. W. Bush orders U.S. forces into Panama in part “to protect the integrity of the Panama Canal Treaty.”
U.S. hands over control of the Panama Canal.
Panamanian citizens widely approve a canal expansion referendum which would create a new lane of traffic and increase the cargo that can be transported through the canal.

A merchant ship sails along the Panama Canal in May. On June 26, the first container ship, the Cosco Shipping Panama, will transit the newly-expanded canal, redrawing the map for global shipping with a new set of locks allowing vessels three times as big to cross. The $5.4 billion project was delayed two years by problems that included contractor disputes and faulty locks. Photo: AFP/Getty Images

Source: Panama Canal Museum