I was interested to read last week that—after months of delays and cost overruns—the expanded Panama Canal is expected to be complete in April 2016.
Grupo Unidos Por el Canal (GUPC) is carrying out the extensive upgrade to the canal’s system of locks, which will allow the waterway to accommodate ships carrying up to 14,000 containers of freight. The group plans to begin final testing on 16 new locks in June, and finishing touches on the construction work would be complete by January next year, says Canal Administrator Jorge Quijano in an Agence France-Presse article.
Although the expansion project was initially projected to cost $5.25 billion, earlier this year it was reported that the project has incurred an extra $2.39 billion in overruns.
Earlier this month, I also saw more about the Suez Canal expansion project. Crews are working 24 hours per day to expand the waterway for two-way traffic. The military is directing the work, which involves digging a new waterway running for 35 kilometers (22 miles) parallel to the canal to end in the Red Sea—while deepening and expanding existing bypasses.
President Abdel-Fattah el-Sissi has said the project will play a critical role in efforts to revive the country’s damaged economy. The canal is one of Egypt’s biggest draws for foreign currency, pulling in a record $5.5 billion in 2014. With the expansion, the canal authority projects it can double the number of ships traveling the waterway daily to 97 by 2023, boosting toll incomes to $13.2 billion that year.
The government’s goal of more than doubling annual canal revenues in less than a decade may prove to be overly ambitious. The problem is that although more vessels may be drawn to the Suez Canal because there will be almost no wait time, any major increase in traffic also depends on a significant increase in European demand for increased shipping from Asia. Then again, shippers will also need to factor fuel prices and the canal’s fee structure into the equation to determine if it’s worth taking the Suez Canal or the long route around Africa.
Nonetheless, with global shipping trends moving toward the use of ever larger, slow-sailing container ships, the canal stands to maintain an advantage for years to come with the container trade. The expansion of the Panama Canal could draw some traffic between Asia and the U.S. East Coast. However, “the biggest, massive container ships will never be able to pass there as it can’t accommodate them, so that’s a natural advantage for the Suez Canal,” says Greg Knowler, a Hong Kong-based shipping expert from U.S. analysts JOC, in an Associated Press article.
The Suez Canal expansion does have the attention of shippers, even if they don’t have plans to ramp up operations immediately. Denmark-based Maersk, the largest single customer of the canal, says it wholeheartedly supports the project, calling it a “historic effort to enable more global trade and boost prosperity overall,” AP reports. What’s more, Keith Svendsen, vice president of operations at Maersk, says in the article that the Suez Canal is the company’s preference because it’s a shorter route, better for emissions, and the company has good cooperation with the canal authorities.
Will the expanded Panama Canal have an impact on your supply chain? What about the Suez Canal? Will it—as the Egyptian government hopes—draw more business to the region?