The 9,742-TEU containership COSCO Shipping Panama began its historic passage through the expanded waterway, construction of which began back in 2007, Sunday morning.
The expanded Panama Canal is being inaugurated Sunday, opening a new era for global trade and transportation, and American Shipper is on site to bring you the latest news.
COSCO Shipping Panama, a 9,472-TEU containership built this year and renamed specifically for the historic event, entered the new Agua Clara locks from the Atlantic Ocean this morning. The vessel will spend the day transiting the waterway, arriving at the new Cocoli locks at the southern end of the canal near the Pacific Ocean port of Balboa for a ceremony late in the day.
COSCO Shipping Panama enters the Agua Clara locks Sunday morning
Until now, the largest ships able to pass through the canal have had a carrying capacity of just 5,000-5,100 TEUs.
Since August 2007, the Panama Canal Authority (ACP) has spent more than $5.4 billion to build a third lane to accommodate larger ships that cannot fit through the original waterway, now more than a century old.
Already, over 170 ships that previously could not have fit through the waterway in the past, mostly large containerships, have made reservations to pass through the expanded waterway, ACP CEO Jorge Luis Quijano said.
Panama President Juan Carlos Varela Rodríguez, ACP Chairman Roberto Roy and Quijano spoke to thousands of executives from shipping companies, port authorities and shippers at a reception Saturday night at the Atlapa Convention Center in Panama City.
Quijano announced that a ship carrying liquefied natural gas (LNG) had made a reservation to use the canal. It was not immediately clear if the LNG would be loaded in Trinidad and Tobago or the United States, but ACP officials said that shippers of LNG and liquefied petroleum gas (LPG), both of which are now being produced in large quantity in the United States because of fracking, were expected to be a big source of cargo in the years ahead. Several LPG carriers have also made reservations to use the larger locks at the canal.
LNG exports will provide “clean energy sources for the people of Japan and South Korea,” he said.
The initial reservations being made by liner companies are for containerships carrying 8,000-9,000 TEUs, but Quijano said he expects ships with 13,000-14,000 TEUs of capacity to be using the expanded waterway in a year or more.
Industry leader Maersk Line said Sunday it was likely to make increased use of the expanded Panama Canal and reroute more services through the waterway.
Maersk Line had abandoned the Panama route for Far East to U.S. services several years ago in order to take advantage of the economies of scale larger ships could afford.
However, the Danish carrier began to reverse course last summer, adding the TP10 service from China and Korea to the U.S. East Coast Suez route. In addition, earlier this year, the carrier started a new string called the TP18, which connects China and Korea with Houston, Mobile and Miami.
Soren Toft, the chief operating officer of Maersk Line, said Saturday that Maersk will likely reroute one of its existing trans-Suez services, the TP11 or the TP12, from a trans-Suez to a trans-Panama routing. The switch may be accompanied by a change in port calls so the remaining Asia-East Coast Suez service would call southeast Asian ports, while the one through the Panama Canal would call ports in northeast Asia. In that way, the company would be able to offer the best transit times. It is also undecided if the service would return through the Panama or Suez canal, or return to Asia via the Cape of Good Hope.
Manuel Benitez, deputy administrator of the Panama Canal Authority, said the canal hopes to attract about 10 percent of the cargo that currently is moved by intermodal rail through West Coast ports to the eastern part of the U.S.
He noted that the canal has broad benefit to the country. The canal employs about 10,000 people and has contributed $1 billion of revenue to a country that had a GDP in 2014 of $46.2 billion according to the World Bank. Benitez said there are projections that in the first year, the money the canal contributes to the country’s economy will be $400 million.
Control tower at Cocoli Locks
The Panama Canal expansion project included building a new set of locks and connecting channels and ocean approaches, deepening and widening existing channels, and adding water storage capabilities.
The event is an exciting one for Panama, a small country of about 4 million people. Foreign dignitaries, tens of thousands of workers who labored on the project, and citizens were attending ceremonies on either side of the waterway, and the entire event was being broadcast live on Panama television and on the ACP website.
Municipal buses were used to ferry persons to and from the event and security was tight, with thousands of police and the Panamanian Public Forces deployed. There were celebrations throughout the country.
Quijano told businesses Saturday that “During the last nine years we felt your support, not only in words, but also in actions as we witnessed the increased number of larger vessels being built to fit the new locks’ dimensions immediately after we announced our expansion.”
The new locks are 180 feet wide and 1,400 feet long compared to the locks that were built more than a century ago, which are 110 feet wide and 1,000 feet long. For the container shipping industry, this means the maximum size vessels able to pass through the waterway will increase from about 5,000 TEUs to 13,500-14,000 TEUs. The new locks use water saving basins that allow them to use 7 percent less water than the existing locks at the canal, even though they can move much larger vessels.
Quijano also noted that ports along the U.S. East Coast have deepened their channels and upgraded facilities, and some shippers have even shifted distribution centers, in anticipation of the expansion’s opening.
“All this is proof of the trust that the shipping industry has on the project’s impact on global trade. You were here with us. Tonight I can proudly say that we did it and we did it together,” he told industry executives last night.
Ships passing through the canal last year handled a record amount of cargo at 340.8 million tons, and Quijano expects the third lane will allow that quantity to double.
The U.S. will benefit not only from LPG and LNG exports, but from lower costs of transporting exports such as grains and chemicals, and importing everything from building materials, household goods, electronic appliances, clothes and toys. Larger roll-on/roll-off ships able to pass through the canal will lower the cost of imported automobiles from Japan and Korea.
South American exporters of bananas from Ecuador, along with wine, apples, grapes, salt and copper from Chile, will also benefit from the economies of scale resulting from the use of larger vessels.