Contractors building new locks for the Panama Canal Expansion project will finish work on May 3, and the canal will open on June 26, Canal Authority Administrator Jorge Quijano said last week. There are concerns, however, about the readiness of U.S. ports for larger post-Panamax vessels.
The $5.3 billion expansion of the 50-mile Panama Canal connecting the Atlantic Ocean to the Pacific Ocean was initially scheduled to be concluded in October 2014. Although a string of work stoppages and disputes with the Italian conglomerate behind the expansion over-cost overruns has led to repeated delays, the Panama Canal Authority has since resolved problems associated with contractors and seepage from the new locks discovered during testing, Jose Ramon Arango, senior international trade specialist at the agency, recently said at a shipping conference.
Contractors building the new locks, which will allow bigger ships to pass through the 102-year-old waterway, will complete works on May 31. The authority is planning a test of the new locks with a tanker in May.
“The date is very close and there is still a lot of work to do,” Canal Authority Administrator Quijano said last week. “We can’t lose face.”
As part of the expansion project, wider locks with mechanical gates will reduce congestion and be able to accommodate post-Panamex vessels, which are as long as three football fields and have the capacity to carry almost three times the number of containers held by ships currently using the canal. The expansion to accommodate larger ships may ultimately shift international trade routes because ships could reach Asia from the U.S. Gulf Coast more than two weeks faster than if they traveled east through the Suez Canal.
The expansion has also been a driving force behind a series of port and infrastructure upgrades throughout the Caribbean and the U.S. East Coast, as ports make changes so they too can accommodate larger vessels. The problem with those projects is that those ports are years away from being ready for extra business, says Gerry Wang, head of Seaspan, which owns large container ships it leases on long-term contracts to big shipping companies.
“The infrastructure’s just not there,” Seaspan Corp. Chief Executive Gerry Wang told Reuters in a telephone interview. “At the end of the day, you want the volume to come, you want big ships to come, but you just don’t have the infrastructure to handle them.”
Deepening of the harbor at Charleston, for instance, is not expected to be completed until 2020, Wang notes. Also, the raising of the Bayonne Bridge linking New York and New Jersey to allow larger, new ships to pass under it is a choke point for carriers because the project is years behind schedule, Wang told Reuters. Furthermore, rail, highway and warehousing infrastructure is also inadequate—and if containers cannot move inland, a port shuts down, he said.
“The first two, three years [after the expanded canal opens] the U.S. East Coast has to learn to adapt to the new traffic coming,” Wang said. “Then it will take years more to settle down the distribution system. Right now, the efficiency’s just not there.”
What are your thoughts on the readiness of U.S. ports and infrastructure in preparation for larger ships? Even if bays are deeper, what do you think the implications will be for supply chains if rail, highway and warehousing infrastructure cannot manage the larger loads?