Canal expansion could turn Panama into hub

Listen to this article

00:00
00:00

Expansion of the Panama Canal should boost trade in products such as Colombian coal and Brazilian iron ore as well as manufactured goods from Asia, according to the canal’s administrator.

Alberto Alemán Zubieta was speaking on Monday after Panamanian voters on Sunday approved a $5.25bn project to double the waterway’s capacity and let larger vessels use it.

The project, expected to be completed by 2014, could also turn Panama into the logistics and transportation hub of the Americas, Mr Alemán Zubieta claimed.

Most analysis of the expansion’s effects has focused on how it will allow larger vessels to serve the canal’s main current market – the export of Asian manufactured goods by container ship to the east and gulf coasts of the US.

Mr Alemán Zubieta said container trade would benefit significantly from the expansion and that Panama would serve as a crossroads for ships travelling from North to South America and east to west between Asia, the Americas and Europe.

But he pointed out that it would also for the first time be possible to bring a “Capesize” bulk carrier – the largest kind of ship for iron ore and coal – through the canal once it had larger locks and deeper navigational channels.

“There are some cargoes like coal from Colombia which today don’t use the Panama Canal,” Mr Alemán Zubieta said. “We can look at iron ore from Brazil, look at agricultural products because now you will be able to bring agricultural products in a larger vessel. Then you reduce the unit costs.”

The project, which will mark the biggest change for world shipping since container shipping displaced breakbulk as the main means of transporting manufactured goods 30 years ago, will see some navigational channels deepened and widened.

The biggest part of the project, however, will be the construction of two new flights of three locks to lift vessels up to and down from the central, summit level that takes them across the continental divide.

The work will be paid for by increased tolls, although financing will be required in the most intense phases of construction.

Mr Alemán Zubieta said a contractor would be appointed and work would start on the new locks in 2008, although some work on the expansion could start next year.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.