Interview: Who Will Gain the Most from Expanded Panama Canal?

Image Courtesy: ACP

The container shipping sector is bracing for a major impact from the long-awaited opening of the expanded Panama Canal, scheduled to take place on June 26, 2016. 

China COSCO Shipping’s container vessel Andronikos will be the first ship to transit the expanded canal, marking the completion of the USD 6 bn project.

As a result, the Post-Panamax vessels with up to 13,000/14,000 TEUs will be able to transit through the canal that will now double its capacity.

Speaking of regions, the US East Coast ports, mainly New York and Norfolk are expected to reap the most fruit from the cargo influx from the expanded canal together with some of the Caribbean/Central American ports that are to emerge as transshipment hubs in the future.

“Container shipping will be impacted the most because US is the largest importer of containerised cargo. A total of 60% of US population lives in the East Coast whereas most of the cargo is being discharged at South California ports. At present, Los Angeles and Long Beach (LA LB) have almost monopoly for all import cargoes, largely coming from Asia. Once the locks are open, US East Coast ports will pose a competition to the West Coast ports, at least in principle (ignoring infrastructure bottlenecks on USEC),”  Drewry’s shipping analyst, Rahul Sharan tells World Maritime News.

Panama Canal

According to Sharan, a substantial impact is expected on the LPG trade as the haulage length between US Gulf and Far East will decrease. As explained, this will decrease demand, in turn increasing overall supply demand balance for LPG market.

For tankers, the expanded canal will benefit Aframaxes as they will be used for Caribs/USES to USWC trade. In addition, it will decrease haulage length from Caribs to Far East decreasing tonne-miles for tankers.

Finally, for dry bulk, there could be increase in parcel sizes for grain cargo moving out of US Gulf to Japan.

However, there seems to be a long way to go before the US East Coast ports become a major competition to the West Coast ports, as the former are faced with several infrastructural issues preventing them to accommodate bigger ships that will be able to transit the new locks.

“Considering draft restrictions only three ports on the east coast (Norfolk, New York & Savannah) can handle ships having capacity of 10,000 TEUs. But, the fact remains that many other East Coast ports that stand to gain are not ready to handle the bigger ships that can come through the new locks. For example, the New York New Jersey Port Authority announced plan in 2010 to raise the Bayonne Bridge which is now delayed till 2017. Similarly, dredging work at Charleston’s port could be completed by 2020. I believe that for immediate and short term, the benefits of the new locks in Panama Canal for US East Coast ports will be marginal,” Sharan says.

The inauguration ceremony will follow the final testing of the third set of locks that entailed the construction of the two new lock complexes in the Pacific and Atlantic sides of the Panama Canal, creating a third lane of traffic for bigger ships.

World Maritime News Staff; Image Courtesy: ACP

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