Inside Logistics

The expanded Panama Canal – One year later

It’s time to look at the impact of the expanded Panama Canal just over a year after it opened


November 16, 2017
by Christian Sivière

Construction on the Panama Canal expansion. (Photo from live Panama Canal Authority webcam at the Atlantic Locks.

The expanded Panama Canal, a massive project that included new locks on both the Atlantic and Pacific sides, a new six-kilometre access channel, and widening and deepening at several locations along its 80-kilometre length, opened on June 26th, 2016. We reported on it in an earlier issue and now it’s time to look at its impact just over a year on.

On its first anniversary, Hapag Lloyd’s Valparaiso Express, with a 13,000-TEU (twenty-foot equivalent units) capacity, two-and-a-half times the size of vessels transiting the original canal, was the largest of five neo-Panamax vessels transiting the locks that day.

The original locks could accommodate ships 294 metres long and 32 metres wide, with a capacity of around 5,000 TEUs. The new locks can handle ships up to 366 metres long and 49 metres wide, with a capacity of around 13,000 TEUs. As of the anniversary date, 1,535 neo-Panamax vessels had used the expanded canal and the average vessel size was 9,000 to 10,000 TEUs.

In the first year, according to the Panama Canal Authority, ships transiting the expanded canal have carried nearly 25 million more tons of cargo than anticipated, however, low oil prices have presented a challenge, as the canal becomes competitive only when oil is above US$55 a barrel.

Some ocean carriers opt for longer routes around the Cape of Good Hope on return voyages, in order to avoid canal fees. To remedy that, the Panama Canal Authority has been offering discounted rates for ships on return voyages, but the competing Suez Canal in Egypt also cut its tolls last August.

New canal milestones

Some of the milestones achieved by the Panama canal expansion in its first year include:

  • On March 19, the 9,008-TEU MSC Anzu was the 1,000th neo-Panamax vessel making the historic transit through the expanded canal. The ship is part of the SAWC-USA-NWC service between Europe, the United States and South America’s West Coast that was consolidated to take advantage of the expanded canal;
  • On May 24, the largest ship to ever transit the canal, the container ship OOCL France—which is as long as the Eiffel Tower and has a 13,926-TEU capacity—crossed from the Pacific to the Atlantic en route from Asia to US East Coast ports;
  • With the development of the liquefied natural gas trade, over 140 LNG vessels from the Sabine Pass LNG terminal on the border between Texas and Louisiana, have transited the canal en route to Asia, the West Coast of South America and the Pacific Coast of Mexico. This is a totally new trade.

While work on the expansion proceeded in Panama, parallel projects were underway on the US Gulf and North East Coasts, to accommodate bigger vessels: the ports of Miami and Savannah dredged and widened shipping channels and the Port of New York and New Jersey completed its raising of the Bayonne Bridge’s roadway this June.

Currently, 15 out of 29 liner services that use the Panama Canal now employ neo-Panamax vessels to take advantage of the economies of scale offered by the expanded canal, the majority of which connect ports in Asia and the US East Coast.

This has added capacity in the east but how full are the ships? Carriers don’t routinely publish this information so we will have to look at yearly volumes after the Thanksgiving-Christmas peak season to see how much cargo has actually shifted from west to east.