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The Panama Canal Expansion May Alleviate Some Congestion at West Coast Ports

Posted on Wednesday January 6, 2016 by admin

The Panama Canal expansion, which began in 2007 and is scheduled to be done by April 2016, is about 95 percent complete. Two new sets of locks – one on the Atlantic entrance, and one on the Pacific – will allow ships with container capacities of up to 14,000 twenty-foot units to fit through the canal, thus doubling the canal’s capacity.

Prior to the expansion, over a third of the world’s ships including: bulk carriers, tankers and cruise liners, and 2/3rds of the world’s container ships, were too large to fit through the canal. This is according to a study by the U.S. Army Corps of Engineers. Thus justifying the costs associated with such a large undertaking.

Panama Canal Expansion

Source: businessinsider.com

Each of the new locks will have three chambers, and each chamber will have three water reutilization basins to improve water flow and supply. The expansion also involves dredging navigational channels in Gatun Lake and Culebra Cut.

A project on this scale has its challenges. October saw higher traffic volumes, which resulted in throughput delays, which peaked at 10 days. As of the beginning of December 2015, transit delays were down to 2 days or less, and the number of ships waiting in transit had dropped by 67 percent.

The most recent construction delay was the discovery of cracks in a concrete sill that parallels one of the sliding gates along a lock. An inspection revealed the need for a 2¼-inch thick reinforcing bar to restore the sill’s integrity and strength.

The contractor for the canal, Grupo Unidos por el Canal (United for the Canal Group, GUCP) is conducting further inspections to determine whether there are additional structural vulnerabilities, but eventually, the canal shall be completed.

Manuel E. Benitez, the Panama Canal Authority’s deputy administrator, says that the canal will offer an 11-day transit advantage from Asian to U.S. ports, which would help the canal regain market share. Asian companies have been using the Suez Canal to ship goods so that they can take advantage of more cost-effective, larger ships. They’ve also been shipping to the U.S. West Coast and moving goods via rail or truck.

Top Asian exporters to the U.S. are China (electronics), Japan (vehicles), South Korea (vehicles), and Singapore (organic chemicals). If companies from these countries are able to use the Panama Canal to ship goods destined for the East coast, this could alleviate congestion at West Coast ports.

A JOC.com article discussed a study commissioned by the Pacific Maritime Association (PMA). The study found that Panama Canal prices for Asian cargo heading to Chicago are estimated to drop 12 to 14 percent from $3,200 to $2,800 per 40-foot container. Subsequently, West Coast ports stand to lose a consequential portion of market share as these lower rates draw away less time-sensitive shipments, but the consumer will benefit from lower prices and faster delivery times.

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