At CMA, the Panama Canal Expansion is Explained: "The Right Thing to Do"

At this week's Connecticut Maritime Association Shipping 2007 Conference in Stamford, CT, a wide range of industry executives were treated to an in-depth justification of the impending expansion of the Panama Canal. Speakers included economist Robert West, Managing Director of Global Insight, Inc., and Rodolfo Sabonge of the Panama Canal Authority (PCA). Leaving no doubt that Panama would proceed with the project, the presentation gave compelling reasons why it was heading down that road.

First to speak was Rodolfo Sabonge of PCA, who asserted that one of the prime movers of the decision to expand was Panama's mission to "produce maximum sustained benefit from our geographic resources." That mission, he said, was in direct contrast to and a major shift away from the American policy of operating a break-even enterprise. "We must now make money," added Sabonge.

According to Sabonge, the canal is not currently able to accommodate the increase in commerce, which is roughly translated into an increase in container traffic. He pointed to Panama's throughput of about 3 million twenty-foot equivalent units (TEU's) in 2006 versus an expected volume of more than 7 million TEU's in 2015 -- without expansion. And while some view the proposed expansion as a radical and new idea, he was quick to declare that the expansion would not be the first major work done to the Canal since the Panamanians took over control of it. Massive infrastructure and improvement projects, though not related to draft or capacity, have been completed during the period of 2000 to 2006.

Already, more than 30% of the world's ships are too big to transit the Canal. By 2015, as many as 40% of the world's container ships will be too big without canal expansion. When the proposed expansion is completed, the Canal will be able to handle vessels of 49 meters beam and 12,600 TEU's as opposed to the current level of 32.3 meters and 4,500 TEU's. According to Sabonge, dredging on both the Pacific and Atlantic sides, coupled with the additional lanes, will double capacity for the canal. In the meantime, with the Canal already reaching maximum capacity, shippers are beginning to look for other routes to move their cargoes in an efficient manner.

Economist Robert West told the gathered CMA executives that, "The Canal is doing the right thing." Even as the expansion is being planned and getting closer to execution, shippers are looking for alternate routes. Among those under consideration are the Mexican option of port and rail companies working together to receive cargo into Mexico's West Coast and shipping the cargo via rail into the United States. The Northwest Passage option, although widely discussed and used by the Panamanians themselves in their decision process, is not thought to be a viable solution to overcapacity. Nevertheless, West said, "TEU growth will continue to grow faster than the economy and container traffic will grow no matter what the world's economic picture looks like down the road. And while the United States is no longer the engine of growth in the world, those countries -- India and China, to name just a couple -- will need the vehicles and efficient routes to get their wares to market."

West concluded by telling his listeners that the exploding Latin American markets, supported by what he calls "the Caribbean Transshipment Triangle," is further good news for the Panama Canal. He also reminded everyone, "The search for alternatives (to the Canal) is ongoing and will continue until 2015, when the Canal is completed."

Managing Editor Joseph Keefe attended CMA and sat in on the Panama Canal lectures. Reach him at [email protected].