The nature of global trade is about to change.
The Panama Canal will soon have a third lane that can accommodate mega-ships nearly three times larger than any vessel that has ever transited the isthmus over the past century.
It might not seem like earth-shaking news. But the impact will ripple around the world, from shipyards in South Korea to highways in Texas to coalfields in Colombia and soy plantations in Brazil's northeast. Entire nations will see trade patterns shift.
Ports up and down the U.S. Atlantic Seaboard are in a frenzied race to get ready for the larger, slower, more efficient ships that one day will ply the
oceans.
They are dredging harbours, expanding rail lines, taking a look at port facilities and distribution centers and, in the case of the New York City area, preparing to elevate the roadway on the Bayonne Bridge so that bigger vessels can slip underneath to Newark Harbor.
"It's been said that it's a game changer. Yes, it is," said Alberto Aleman, a Texas A&M-educated engineer who has been administrator of the canal for 16 years during a period in which the United States handed off control to Panamanian hands.
Since the SS Ancon became the first ship to slide through the locks of the Panama Canal on August 15, 1914, the roughly 80km-long waterway has saved cargo lines the journey around Cape Horn and through the stormy Drake Passage at the southern tip of South America. More than a million ships have transited the canal, and roughly 5 percent of all world trade moves across the isthmus each year.
But the Panama Canal was always constrained by the size of its locks, permitting no vessel longer than 965 feet, wider than 106 feet and with a
draft greater than 39 feet to pass through. Ships suitable for the canal became known as Panamax vessels and could carry nearly 5000 6m shipping containers.
When the third lane opens in late 2014, the canal's capacity will more than double. Ships as long as 1,200 feet and up to 160 feet wide, with drafts as deep as 50 feet, will be able to transit. The largest vessels will carry as many as 13,200 containers, or at least double the dry weight of bulk cargo that can pass through today.
Panamax vessels are long, slim and require a lot of water ballast to maintain balance. New mega-ships will be wider, more stable and will consume up to 16 percent less fuel - meaning a smaller environmental footprint and lower costs for their operators.
Shipyards are seeing a surge in orders for what are called post-Panamax vessels.
"The economies of scale mean it is only one ship moving twice the amount of cargo," Aleman said.
The Panama Canal widening will affect inland railway hubs such as Kansas City and ports along the Gulf Coast, according to a study released in June by the US Army Corps of Engineers. As shipping becomes cheaper, rail lines that handle cargo coming from Asia that is offloaded at Pacific ports and rolled across the country may notice a slowdown, it said.
Yet it will be a boon for the Midwest Farm Belt as grain exports moving through the Gulf Coast become more competitive in Asia, it said.
"This could have a significant impact on both the total quantity of U.S. agricultural exports and commodities moving down the Mississippi River for
export at New Orleans," the study predicted.
More goods will move through Texas ports, too, and motorists are certain to groan at clogged highways. Texas officials in May created the Panama Canal Stakeholder Working Group to figure out how such highways as I-35 between Dallas and San Antonio, which already handles some 200,000 vehicles a day, will cope.
The widening of the canal will affect trade across Latin America.
Very large ships carrying coal from northeastern Colombia and iron ore from Brazil will soon be able to take the raw material to China through Panama more cheaply, giving a boost to those industries and creating jobs. Chilean copper producers will find it easier to export to European markets.
"There's LNG (liquefied natural gas) coming out of Trinidad & Tobago today that goes to Chile, and that has to go around the Cape," Aleman said. Once the canal expansion is completed, it can go through the canal, shaving hundreds of sea miles from the trip to Chile.
With the widening, Panama also hopes to transform itself from just a transit point for cargo into a logistical hub where ships can be overhauled in dry dock, containers sorted for onward passage and industrial parks set up for final assembly of goods.
Already, major multinationals, including Caterpillar, Procter & Gamble, Dell and Mexico's Cemex have turned to Panama as a headquarters for regional operations.
"All of America is coming here to Panama," said Adolfo Quintero, an economist at the University of Panama.
