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Panama Canal opens $5B locks, bullish despite shipping woes

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    Thousands of spectators watch as the Neopanamax cargo ship, Cosco Shipping Panama, makes its way through the new new Agua Clara locks, part of the Panama Canal expansion project, near the port city of Colon, Panama, Sunday June 26, 2016. The ship carrying more than 9,000 containers entered the newly expanded locks that will double the Panama Canal’s capacity in a multibillion-dollar bet on a bright economic future despite tough times for international shipping.

PANAMA CITY >> Amid exploding fireworks and waving flags, a Chinese ship carrying more than 9,000 containers on Sunday entered the newly expanded locks that will double the Panama Canal’s capacity in a multibillion-dollar bet on a bright economic future despite tough times for international shipping.

Several tug boats pulled “Cosco Shipping Panama” into the new locks at Agua Clara under a cloudy sky in Colon province, about 50 miles north of the capital.

“This is the route that unites the world,” said Panamanian President Juan Carlos Varela.

“This new transit route is the tip of the iceberg in making Panama once again the logistic center of the Americas,” canal administrator Jorge Luis Quijano said as the ship headed for the Pacific Ocean. “And it represents a significant opportunity for the countries of the region to improve their infrastructure, increase their exports.”

Thousands of Panamanians who began gathering before dawn to witness the inauguration of the canal’s expansion waved the national flag as the band struck up a song.

“It’s a one-time experience, a great achievement,” said Felicia Penuela, a housewife from Colon province. “Panama is showing the world that even though it is a small country it can do great things.”

Nearly two years late due to construction delays and labor strife, the $5.25 billion project formally launched with the transit of the 158-foot-wide, 984-foot-long, Chinese-owned container ship. It’s one of the modern class of mega-vessels that will now be able to use the canal.

With 30,000 people and eight foreign heads of state expected to attend the daylong festivities, officials are bullish.

“There is evidence that the Panama Canal, with this expansion, is an important player not only for regional maritime commerce but worldwide,” said Oscar Bazan, the Panama Canal Authority’s executive vice president for planning and commercial development. “The canal is a winning bet. (Clients) will benefit from saving not only time but also money, because the canal is a route that shortens distance.”

However, the party comes amid a lull in global shipping due to the drop in oil prices, an economic slowdown in China, which is the canal’s second-largest customer, and other factors that have hit the waterway’s traffic and income.

While authorities anticipate increasing commerce between Asia and ports on the U.S. East Coast, doubts remain that not all those ports are ready to handle the huge New Panamex-class cargo ships. Net cargo volume through the canal from the U.S. East Coast toward Asia fell 10.2 percent in 2015, according to official statistics. Meanwhile the Suez Canal in Egypt recently lowered tariffs by up to 65 percent on large container carriers in an attempt to keep its traffic.

“It’s important to remember that the canal does not create demand. The canal opens the route. Supply and demand on a world level is what will decide whether the Panama Canal will really bring more volume or not,” said Antonio Dominguez, a general manager for global shipping leader Maersk Line, which moves about 14.2 percent of world commerce. “What is certain is that the current canal has maxed out.”

Maersk was among shipping companies that have reduced passages through the Panama Canal, although Dominguez said the company is considering a return.

Since the canal was handed over from U.S. control at the end of 1999, the waterway has generated about $10 billion in direct income for the Central American nation and is responsible for about 40 percent of its GDP, factoring in related economic activity. Some 35 to 40 vessels transit the waterway each day, and the canal is estimated to handle about 6 percent of world maritime commerce.

Panama began the expansion nearly a decade ago. Originally planned to open in late 2014 around the waterway’s centennial, the new locks can accommodate ships that carry up to three times the cargo of those previously able to use the canal.

Grupo Unidos por el Canal, the Italian- and Spanish-led consortium that spearheaded construction, handed the project over Friday, although a series of claims are still pending for presumed cost overruns of more than $3 billion.

Paul Bingham, a shipping economist at Boston-based EDR Group, predicted the canal expansion’s global impact will be small.

“The proportion of world trade that could plausibly use the Panama Canal is constrained by the geography of the world’s population, resource endowments and production regions,” Bingham said. “There is very little a larger canal can influence at the margin to induce shifts in the geography of world trade, even through potential reductions in costs of shipping a variety of commodities to, from and within the Americas.”

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    • The leaks were repaired a while back. But it does indicate poor quality work and lack of proper oversight. We shall see in time how the new section functions in the long haul. Meanwhile, the “new expanded”canal section is already too small for the latest generation of ships. A curious design flaw by Panamanians who were trying to meet the future needs of shipping companies. They didn’t really have much vision, did they? Before they even started construction, drawings for ships that are operating today, that were too big for this new canal, were already on the books. Finally, this is a poorly written article. The writer says there is a “lull in global shipping due to a drop in oil prices.” WHAT?? Idiot. A huge drop in oil prices have actually helped shipowners survive, albeit barely. There is a lull in shipping all over the world (which has impacted the canal) but that is due to a dramatic and ongoing slowdown due to a wide variety of economic factors. In short, poor leadership in America, the world’s biggest market, for 8 years of Obama-economics, has lead to no growth, higher unemployment, poor consumer confidence, regulations that impede business in every sector, and general malaise. Is that so hard to figure out?? Once we get past Obama’s regime of economic, social, political, and judicial terror…we will (hopefully) be free to prosper once more. And the rest of the world will, too! That is, unless we vote for Hillary. Then it’s for more years of the same or worse. You get what you vote for. The most crooked politician money can buy.

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