Panama City: With its capacity boosted by nearly three times, Panama’s enlarged canal — set to be inaugurated on Sunday — is expected to stimulate trade between the United States and Asia, and steal business from the rival Suez Canal.
“A good deal of the commerce between Asia and the east coast of the United States can pass through directly on Neopanamax ships, which will help both sides,” Nicolas Ardito Barletta, a former Panamanian president and former vice president of the World Bank in Latin America, said.
Neopanamax ships, as their names suggest, are new generation cargo vessels built specifically to pass through the broadened Panama Canal. They can carry up to three times the number of containers the previous generation of smaller Panamax ships do.
Panama has spent the past nine years — and more than $5.5 billion (Dh20 billion) — expanding its century-old canal to take on bigger freighters.
New locks and a wider shipping lane will allow vessels as wide as 49 metres and as long as 366 metres to pass through.
The aim is to greatly increase the amount of cargo transiting the 80-kilometre long waterway linking the Pacific and Atlantic oceans.
“We are at the dawn of a great time for Panama and the world, thanks to the impact the canal’s expansion will have,” Panama’s Vice President Isabel De Saint Malo boasted.
Chinese ship to be first through
Five per cent of commercial maritime traffic already passes through the canal, particularly between ports in America, China, Japan and South Korea. To a lesser degree, it also serves South America and Europe.
On Sunday, a Chinese Neopanamax freighter, named the COSCO Shipping Panama for the occasion, will be the first to officially go through the broadened canal.
Asian exporters, shipping groups and US logistical and trade companies should be the first to benefit from the modified canal, says Carlos Guevara-Mann, a Panamanian political science professor at Florida State University.
American consumers will also see advantages, ending up paying “less for imported items from China and neighbouring countries”, he predicted.
In general, the costs of doing trade worldwide should decrease, as should polluting emissions, because a fewer number of bigger ships would be hauling goods, specialists say.
“The Panama Canal’s expansion will greatly boost world trade,” Ardito Barletta said. “Bigger ships will be able to transit and that will bring down the transaction and logistic costs.”
The United States is the canal’s largest client by far, transporting some 160 million tonnes a year through the waterway.
China is next, with 48 million tonnes, then Chile with 29 million tonnes and Japan with 22 million tonnes.
With room for bigger ships now, the main market the canal is looking to attract is transporting liquefied natural gas from the United States to Asia, mostly Japan.
“The gas transport ships are big and now can get directly to their destination by going through the canal,” Ardito Barletta said.
Asians ‘first to step up’
More than 150 ships have already reserved their places in the line to pass through, the Panama Canal Authority’s administrator Jorge Quijano says.
“Obviously, the first to step up were the Asians,” he said. “We have companies from Japan, Taiwan, China and South Korea.”
Forecasts say 600 million tonnes of goods a year will pass across Panama this way, twice the current volume, within the next decade.
Panama expects it will triple the $1 billion in revenues it gets from shipping fees.
It also wants to bring back clients that dropped the canal for its rival, Egypt’s Suez Canal, which had been the only passage able to handle the bigger ships up to now.
“We’ll see what percentage we’ll recover,” Panama’s canal minister, Roberto Roy, said. “But I’m sure it will be appreciable.”
Using the Panama Canal would save ships two weeks compared to the Suez Canal, the Panamanian authorities say.
That is “a considerable time saving” for maritime companies, the minister said. “I’m certain they’ll appreciate that.”