Panama opens expanded canal to newer, bigger ships

PANAMA CITY, Panama (UPDATED) – Panama on Sunday, June 26, declared its century-old canal open to a new generation of supersized cargo ships after years of massive expansion works aimed at boosting its cut from burgeoning US-Asia trade.

A giant Chinese-chartered freighter made its way along the 80-kilometer (50-mile) waterway linking the Atlantic and Pacific oceans.

Its passage was to show off the third, wide shipping lane and gargantuan locks built into the canal accommodate vessels of its class, known as Neopanamax, or New Panamax, ships.

The freighter’s horn bellowed out triumphantly several times over a pyrotechnic inauguration ceremony attended by VIPs and thousands of ordinary Panamanians, triggering applause and cheers.

President Juan Carlos Varela, who has hailed the renovated canal as “the route that unites the world,” led the celebrations, set up alongside new locks near where the canal exits into the Pacific.

He stood on stage with dignitaries including Chilean President Michelle Bachelet, all wearing white, while the ship nearby towered over them, as Panama’s national theme played.

Varela, in a speech to the crowd, admitted he had not backed the canal’s expansion initially, before becoming president.

But as leader, he said, he recognized it would deliver “a better future” for the country.

The United States – builder of the original canal, which opened in 1914 and is still in operation alongside the additions – was represented at the ceremony by Jill Biden, the wife of the US vice president.

The United States and China are the two most frequent canal users.

Untapped market

The expansion work was carried out since 2007 and finished two years late at a cost of at least $5.5 billion.

Labor disputes and friction between the government and the European consortium that carried out the project dogged the work. Still outstanding are demands by the consortium for costs overruns of hundreds of millions of dollars.

Sunday’s celebrations concentrated on the achievement though, which promises to double the volume of cargo passing through the Panama Canal, and allows it to take 98 percent of ships on the oceans.

Neopanamax freighters can carry up to three times the cargo of older and smaller Panamax ships. Cruise ships built to the same dimensions typically double the number of passengers of the previous iteration.

The expansion will also allow Panama to lure gargantuan liquified natural gas (LNG) tankers.

For the canal, they represent a lucrative and untapped segment of the shipping market whose importance has grown with the development of US exports of natural gas from shale, most of which head to Japan and South Korea.

Panama’s plan is to triple the $1 billion in revenue it currently gets from canal shipping fees.

However, that goal might still be a decade away, according to officials from the Panama Canal Authority, the autonomous government agency that runs the waterway.

For some, Panama might have been overly ambitious in calculating how fast it will see its investment pay off, particularly amid world shipping prices that have dropped due to capacity oversupply.

“Everybody is always overly optimistic,” said Peter Shaerf, deputy chairman of Seaspan Corporation, a container ship group with a fleet of 100 vessels, more than half of which are Neopanamaxes.

But, he told Agence France-Press on Saturday, June 25, the canal itself is “one of the engineering wonders of the world” and it “will have a huge impact on trade.”

Countering ‘Panama Papers’ damage

For Panama, the feat is a source of national pride, symbolizing the country’s enviable modernity compared to neighbors, and its consistently high economic growth.

The government hopes the glitz and historical nature of the broadened canal will help overshadow the blow the country took to its reputation this year with the “Panama Papers” scandal.

Revelations of offshore companies started by a Panama law firm, and used by the world’s rich and influential to dodge taxes and stash assets, have become the first thing many people think of when the Central American nation is mentioned.

But the canal, and the work to develop it for modern trade, is “the real face of Panama,” Jorge Quijano, the Panama Canal Authority chief, told Agence France-Presse this week. – Rappler.com