The $5.25 billion Panama Canal expansion project is now approximately 90 percent complete, and the Panama Canal Authority has begun filling the locks with water. As the project gets closer to completion, more questions arise about just what impact the expanded canal will have on shipping.

 

Last month, the Panama Canal Authority filled the canal’s Atlantic locks. Then management began pumping water into the locks on the Pacific side of the canal in preparation for about four months of tests and inspections.

 

The expansion project, which is expected to open to commercial traffic in April 2016, includes larger locks on both the Atlantic and Pacific sides of the 50-mile-long canal, as well as new access channels to accommodate larger post-Panamax ships. The new locks will work in parallel with the canal’s current 100-year-old locks, which will continue to handle the transit of smaller ships.

 

Rodolfo Sabonge, who worked for the canal authority for 30 years before retiring as executive vice president of planning and business development in 2013, said the main impetus for expansion was that the canal was reaching capacity, rather than just the need to handle big ships, a recent Miami Herald article reports. A study showed the canal would reach its capacity in 2011, but the global financial crisis and falling levels of trade “bought some time,” says Sabonge.

 

“Now the expansion has come just in time,” Sabonge says in the article. “The canal wasn’t going to be able to handle the number of ships.”

 

Work isn’t just being completed in Panama, however. Indeed, ports all along the Eastern Seaboard and Gulf Coast have been rushing to be big-ship ready so they can become major ports of call for post-Panamax ships. Port Miami is ahead in the race, as its port authority expects to have the port’s shipping channels dredged by August so it will have the deep water necessary to handle fully laden post-Panamax ships, the Herald reports.

 

Numerous other port authorities are investing millions to have ports dredged and widened so they too will be able to accommodate larger ships. It is the opinion of Sabonge, now president of Universidad del Caribe and a logistics consultant, that such efforts aren’t always the best course of action. At the end of the day, not every port should expand, he says in the Herald article. As long as ports are all competing with each other, it’s not going to benefit anyone, he says.

 

The problem, according to Sabonge, is that the canal itself “doesn’t create trade or demand.” That’s because expansion of the canal doesn’t necessarily mean more trade will follow, he says.

 

Interestingly, as was recently noted, Cuba recently overhauled, deepened and expanded the Port of Mariel as part of a plan to build a regional trading hub. The port has already been dredged to a depth of 60 feet to accommodate post-Panamax vessels, and it will feature a terminal with the capacity to receive three million containers a year. Port Mariel also will have a road and rail network that connects with existing highways to guarantee efficient handling of the additional traffic generated by the port expansion.

 

Jamaica’s Kingston port is better positioned for Caribbean trans-shipment because Port Mariel is too far out of the way, says Sabonge in the Herald article. But if commercial ties between the U.S. and Cuba really do open up, Cuba could be an important location for near-shoring, he believes, with manufacturers leveraging a low-cost, well-educated labor force and setting up plants on the island to feed U.S. demand.

 

“If that happens, Cuba will be the best near-sourcing possible,” says Sabonge. “That gives Florida a great opportunity to become a base of all that activity.”

 

What are your thoughts on how an expanded Panama Canal will impact shipping? Also, do you envision Cuba becoming a viable near-shoring location?