Note from Susan…Mike shared his experience at the inaugural transit for the expansion of the Panama Canal in an email. His first hand viewing of the event was something I wanted to share with you all. I’ll be speaking with Mike this week & will share the audio then.
By: Mike Steenhoek, Executive Director
Soy Transportation Coalition
I had the opportunity yesterday (June 26) to be in attendance at the inaugural transit of the expanded Panama Canal. It is not every day one has the opportunity to witness a development that will have substantial and long lasting impact on the global economy, including U.S. agriculture. The Panama Canal expansion certainly has that potential.
The vessel performing the inaugural transit was the Cosco Shipping Panama – a 9,000 TEU (“Twenty Foot Equivalent Unit”) container ship. During a ceremony Saturday evening I attended, the Administrator of the Panama Canal, Jorge Luis Quijano, announced that the new, expanded canal has received 170 bookings – most of which are container vessels and liquefied natural gas (LNG) or liquefied petroleum gas (LPG) vessels. Given the significant width of LNG and LPG vessels, the Panama Canal heretofore has not been able to accommodate such shipments via the original locks. The larger locks will be able to accommodate them – opening up a new business line for the Panama Canal. It is projected that the expanded canal will be able to handle 10-12 transits each day. This will add to the approximately 40 transits a day the original two lane canal accommodates.
Prior to yesterday’s inaugural transit through the full canal, the Panama Canal Authority used a 115,000 deadweight ton (dwt) dry bulk vessel when successfully testing one of the new set of locks. Dry bulk vessels are utilized for transporting soybeans, grain, and other commodities such as coal. Dry bulk vessels utilizing the original canal are usually 50,000 – 60,000 dwt vessels. Thus far, no soybean or grain vessels have booked a transit for the new, expanded canal. Such bookings will likely occur later in the year following the U.S. harvest. Given how the new canal will be able to handle ships over twice the size of the current “Panamax” (the maximum size of ship that can transit the original canal) vessels, the ability to load a ship with substantially more revenue-producing freight will present a compelling option for soybean and grain shippers as they strive to remain profitable in an increasingly competitive global market.
Below is a graphic from the Panama Canal Authority that compares the size of the new and the original locks along with the ships able to utilize them.
Deadweight tons convey a ship’s carrying capacity – including the cargo, fuel, ballast, crew, etc. It does not include the weight of the actual ship.
The Panama Canal expansion began in September of 2007 and is comprised of the following:
- The construction of two new sets of locks – one each on the Atlantic and Pacific sides – and excavation for new entrance channels to the new locks.
- Widening and deepening of the existing channels
- Raising the water level of Gatun Lake – the source of fresh water that allows the gravity operated canal to function.
The original plan was to have the expansion project completed by August 2014 to coincide with the 100th anniversary of the original canal. However, a number of construction delays and disputes between the Panama Canal Authority and the contractors have resulted in a series of delays. The original projected cost of the expansion is $5.25 billion. The final cost upon completion is expected to be higher.
Each year, approximately 600 million bushels of U.S. soybeans transit the Panama Canal – the number one agricultural commodity utilizing this critical link in the logistics chain.