Bigger, better Panama Canal opens for business

Heads of state, regional business and community leaders gathered at the Panama Canal to celebrate the completion of the $5 billion expansion project that will improve the competitiveness of one of the world’s two most important short-cuts for trade.

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Watch the inauguration of the new Panama Canal 1:00

Juntos lo hicimos! We did it together. Panamanians, the Parliament, the ex-President, the workers. A proud but humble President Juan Carlos Varela—who acknowledged to loud, appreciative cheers that he did not initially support the expansion—invited Panama and the World to be proud of this historic day.

“This is not just an important construction project for Panama, the region and the world. It is a symbol of the will and strength of our nation,” President Varela said.

“The eyes of the world are on us today and many of them are here to support us and celebrate this achievement. I promise to work with the Canal authorities to deliver on the promises and full value of this Canal and ensure that the profits are used for the betterment of the Panamanian people. Now wave your flags and show the world what this means to our country, we are proud of what we’ve achieved!”

Fireworks, music, and the opening of the Cocoli lock allowed the COSCO Panama, the first vessel to officially transit, to pass and continue its voyage towards the Pacific.

9-years in the making
The expansion of the Panama Canal has been an infrastructure and engineering project of immense size and complexity. The planning for the project began in the late 1990s and construction began in 2007. It took nine years to complete, cost an estimated $5 billion and created 41,000 jobs in Panama.

Panama Canal
The expansion of the Panama Canal has been an infrastructure and engineering project of immense size and complexity.
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Time-lapse showing the construction of the Panama Canal expansion 0:16

As a long-time customer, Maersk Line welcomes the expansion of the Panama Canal and we look forward to seeing our larger vessels pass through the new locks. It is a very positive development for trade, Panama and the region, and of course the shipping lines that transit this important corridor every day.

SØREN TOFT, CHIEF OPERATING OFFICER, MAERSK LINE

Facts about the Panama Canal

  • 1917 First Maersk Line vessel passed through the Canal
  • 75,000 people worked to carve the 80 km channel through the jungle of Panama
  • 25,000 people died during the 33-year construction of the original Canal, primarily from tropical disease
  • Largest users of the Canal today: USA (70% of cargo going to/from) China (21%)

The result is a third set of much larger, modern sliding locks (one at the Pacific, another at the Caribbean Sea) and deeper and wider navigation channels that are able to accommodate much larger container vessels (see graph) as well as other types like tankers. At stake for the Canal is the approximately 6% of global trade that passes through the 80km waterway, paying hundreds of millions of fees to the nation of Panama and facilitating global trade.

The expansion is in response to the steady increase in size of all vessel types and heavy competition from larger competitor, the Suez Canal, which has pulled customers like Maersk Line away from the Panama Canal in recent years for its ability to handle the largest vessels and for its lower transit fees.

Maersk Line is still one of the largest customers of the Panama Canal: Of the 12,000 annual transits through the Panama Canal, more than 400 of them are Maersk Line vessels carrying more than 400,000 containers and paying $100 million in annual transit fees to the Canal. With the expansion, Maersk Line expects the number of containers passing through to increase by 25% or more.

New Canal mean faster transit times
Almost all of this new volume will ship between the US East Coast and Northeast Asian markets, where shorter transit times will make the expanded Panama Canal a competitive option for US oil and gas exporters and container shipping lines. Container cargo traveling on this route transits the Suez Canal aboard vessels too large for the old Panama Canal locks.

Panama Canal Fiesta
People celebrating during the inauguration.

The new Canal is no doubt a positive for Panama, the region, and global trade in general. For Maersk Line customers, we expect the faster transit times between the US East Coast and Asia will be an attractive option for some customers.

ANDERS BOENAES, HEAD OF NETWORK, MAERSK LINE

Panama Canal History

  • 1881 Construction begins under the leadership of Ferdinand De Lesseps, the Frenchman that led the creation of the Suez Canal in 1869
  • 1904 The Americans take over the project
  • 1913/1914 The Americans finish the Panama Canal and it is officially opened
  • 1977 Torrijos-Carter Treaty sets terms for gradual process of handing over operation and control of the Canal from the Americans to the Panamanians
  • 1999 Panama gains full control of the administration and operation of the Canal
  • 2007 Expansion begins to accommodate global trade’s larger ships
  • June 26 2016 Expansion completed

Using the new Panama Canal, these larger container ships will be able to cut voyage times for customers by as much as 7 days and save on fuel costs. For other services where voyage times are not radically different between the two canals, transit costs among other factors will be considered.

“The new Canal is no doubt a positive for Panama, the region, and global trade in general. For Maersk Line customers, we expect the faster transit times between the US East Coast and Asia will be an attractive option for some customers,” says Anders Boenaes, Head of Network, Maersk Line.

For Panama, the expansion has been a huge undertaking but the country has even bigger plans. It wants to be much more than a transshipment point for trade and is examining opportunities to develop the 80 km channel that brings vessels to and from the Atlantic and Pacific Oceans into a logistics hub, creating new multi-purpose ports and logistics parks, similar to what Rotterdam, the Netherlands has. The country is already a regional leader in infrastructure with strong road, airport and seaport connectivity, and wants to leverage this with its centrality in the region, both for US and LAM export and consumer markets.