Editor's note - Kristen Rupert is Executive Director of the AIM International Business Council.
I recently traveled to Panama for ceremonies marketing the expansion of the Panama Canal, a project with significant implications for the Port of Boston and the Massachusetts economy.
Driving the Canal expansion is the advent of newer “Post-Panamax” or “Neo-Panamax” container ships, which can carry up to 15,000 containers or “TEU’s,” (twenty-foot equivalent units.) The historic Panama Canal can accommodate only 5000 TEU ships; expansion enables the Canal to accept much larger vessels. These ships previously had to transit through the Suez Canal or around the Horn of Africa.
Ports across the Eastern United States will be most affected by the Panama Canal expansion, because Neo-Panamax ships from Asia—China, mostly—will now have the option of transiting the Canal and heading to ports such as Norfolk, Baltimore, Miami, Savannah and Charleston, and eventually New York, rather than docking in California at Long Beach and moving cargo across the U.S. via train or truck. Significant cost savings can be achieved by carriers using larger ships that can carry cargo closer to its ultimate U.S. destination. U.S. shipments of LNG to Asia are also expected to use the new Canal.
The Port of Boston is already benefitting from the expanded Canal. COSCO—China Ocean Shipping Company—is a longtime partner of the Port of Boston; the company recently committed to doubling the capacity of their ships calling on Boston from China. This will enable Massport’s Conley Terminal—the only full-service container terminal in New England—to handle significantly more volume. This translates into jobs and positive economic impact.
The U.S. Government has committed to funding a major dredging project for Boston Harbor, though the appropriation has not yet been finalized. In the meantime, some inner harbor dredging is taking place along with dock improvements. (Among the imports and exports moving through Conley Terminal are seafood, footwear, waste paper, scrap metal, furniture, beer and wine, and apparel.)
In late June, Panama inaugurated the expansion of the 100-year-old Canal with a day-long celebration featuring speeches, fireworks and a huge (1,000 feet long and 160 feet wide) Chinese container ship transiting through the new locks from the Atlantic to the Pacific Oceans. Panamanians are justifiably proud of their fifty-mile long Canal, which returns more than $2 Billion per year to the Panamanian government. Thousands of Panamanians turned out along the Canal for the expansion inauguration, waving flags and celebrating an historic day.
The expansion was at least 10 years in the making and cost more than $5 billion. Tens of thousands of workers have labored since 2007 to design, blast, dredge and build extensive new locks and approaches on both the Pacific and the Atlantic sides of the Panamanian isthmus. Although the new locks are much bigger than the historic locks, they use less water; 60 percent of the water that fills the locks as ships pass through is being re-used through large water saving basins.
The new locks feature rolling gates, similar to sliding doors you might see on a barn. The old locks, still in use in a different part of the Canal, use saloon-door type gates which swing open and closed. The tallest of the new lock gates is about 100 feet high.
The Panama Canal expansion project struggled through numerous challenges, including low water in Lake Gatun which feeds the locks, issues with the quality of the concrete used for the locks, the decision to use tugboats rather than “mules” or mini-train engines to guide ships through the locks, cost over-runs, and the smaller-than-desired space in each lock (many pilots said they wish the new locks—at 1,400 feet long and 180 feet wide--were longer and wider.)
In addition, the future for global shipping is a bit cloudy. Fuel prices have dropped dramatically, China is going through an economic slowdown, and global trade is in a lull. Despite this, the expanded Panama Canal has more than 150 crossings scheduled for the next several months. Only time will tell how Panama benefits from its new, expanded Canal.