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Panama Canal Expansion – How is it impacting shipping?

Sep 07, 2016

Just over a century ago, in 1914, the Panama Canal was originally opened. On June 26, 2016 the first container ship made its journey through the newly-expanded Panama Canal. What makes this significant isn’t simply that there are now three lanes in the Canal. It’s the capacity of the larger ships that can be accommodated by the Canal now.

Container Ship in Panama Canal.jpgThe Expansion

Prior to the expansion the maximum ship size (referred to as Panamax) that could transit the canal was limited by the size of the two main locks which measured 110 feet wide and 1,050 feet long with a maximum draft of 39.5 feet. The $5.25-billion project added a third set of locks and further deepened and widened existing infrastructure. The wider locks measure 160 feet wide and 1,200 feet long with a maximum draft of 50 feet of water. This doubles the waterway’s capacity and accommodates Post-Panamax (aka Neo-Panamax) ships that measure up to 1,200 feet long. The Panamax ships could accommodate 4,500 to 5,000 TEUs (twenty-foot equivalents units – a measure of a ship’s cargo carrying capacity with dimensions of a standard 20-foot shipping container). The Post-Panamax ships can carry up to 13,000 TEUs almost tripling the capacity of container ships that can pass through the canal. Having the third set of locks in the canal also doubles the number of ships that can travel through the canal.

The Impact

Many have been speculating what impact the expansion of the Panama Canal will have on shipping routes and rates. Prior to the opening of the newly-expanded Canal many changes to infrastructure took place or are currently in the works. These include:

  • Paving expanded areas for off-loading containers from larger ships
  • Larger cranes to off-load these containers
  • Upgrades to accommodate greater intermodal transportation via truck and rail
  • Increased warehousing – independent as well as additions by large retailers near newly-expanded ports on the East and Gulf coasts
  • Dredging to widen and deepen East and Gulf coast ports to accommodate post-Panamax vessels
  • Raising of bridges to allow access to East and Gulf Coast ports 

Shipping routes and rates

Sixty-six percent of container traffic from East Asia has been going to West Coast ports. Twenty percent has been traveling to East Coast ports through the Panama Canal and fourteen percent through the Suez Canal. Now that the Panama Canal expansion is complete it is expected that the Panama Canal will be utilized more often than the Suez Canal to reach the East Coast since it is a shorter route from East Asia. Work stoppages and delays experienced at West Coast ports in recent years helped redirect a lot of cargo traffic to the East Coast. The Canal expansion makes it even easier for more of this to happen. Overall it is expected that up to 10 percent of container traffic to the U.S. from East Asia could shift from West Coast ports to East Coast ports by 2020. The actual impact on shipping is expected to be gradual and evolutionary. Rates are expected to drop due to the increased capacity per ship. 

For assistance selecting the best shipping option to meet your needs please contact American Group at 866-553-6608.