Later this spring, an expanded Panama Canal is expected to open for business, doubling the 102-year-old waterway’s capacity and sending ripple effects around the world, including the Gulf Coast.
As 10/12 Industry Reports details in a feature from its new quarterly issue, the canal currently accommodates an estimated 5% of the world’s total cargo volume, according to the U.S. Department of Transportation, with trade between Asia and Western economies dominating demand for the canal’s capacity.
Although it takes eight to 10 hours for a ship to traverse the canal, the alternative is an 8,000-mile journey around Cape Horn.
As global trade has skyrocketed, the canal’s ability to increase its capacity was hampered by a limit on the size of vessels and the amount of traffic it can accommodate. At its narrowest point, the canal spans about 110 feet, which is inadequate for the increasingly large container ships used to transport goods. The expansion project was needed to increase capacity to meet growing demand as well as to modernize the 50-mile-long canal.
Construction on the $5.25 billion project began in 2007 and includes widening and deepening the waterway, building new locks—one each on the Atlantic and Pacific sides—and excavating new channels to the new locks. As a result of the expansion, larger post-Panamax ships holding 15,000 standard shipping containers (known as 20-foot equivalent units, or TEUs) will be able to access the canal, compared to ships holding a maximum of about 5,000 TEUs today. Panama Canal volume will grow from 12.3 million TEUs to 25.4 million TEUs by 2028. The expansion will also reduce bottlenecks and lower average transit times.
The expanded canal is currently projected to open in May—about a year and a half behind the original schedule.
The project is one of the largest global trade infrastructure changes in more than a century. By providing shippers easier access to North America, the canal’s expansion will have ramifications for global trade, including an impact on shipping routes, port development and cargo distribution. It will likely reduce the cost of transocean shipping, particularly for those trade routes between Asia and ports on the U.S. East and Gulf coasts, and could affect global supply chains and demand for industrial real estate space.
Port and inland infrastructure upgrades from Canada to the Caribbean are already underway in anticipation of the larger cargo ships. This includes Louisiana’s ports.
Read the full feature, and check out the full lineup of stories from the new quarterly issue of 10/12 Industry Report. Send feedback, story ideas and company news to editor@1012industryreport.com.
