Loyal readers of this space know we’ve given you regular reports on the largest high-impact economic development project in the world–the expansion of the Panama Canal, which will double the capacity of the most vital shipping artery on the planet.
When we first started zeroing in on the Canal project about four years ago, we anticipated that by now we’d be parsing the empirical data of expanded trade resulting from the supersized shortcut between the Atlantic and Pacific. The Big Dig in Panama originally was supposed to be completed in time for the Canal’s 100th anniversary in 2014.
Well, it’s still not time to don our Teddy Roosevelt costume and pop the champagne. Five years and $6 billion later, the job isn’t finished and the new locks are not open for business. The latest ETA for the expanded Canal is mid-2016. [Editor’s Note: To be fair, it probably was too optimistic for anyone to believe that a project as ambitious as the ancient Pyramids of Egypt could be completed in seven years; for example, the largest inland navigation project in the U.S.–the $3-billion Olmsted Locks and Dam on the Ohio River–is more than $2 billion over budget and decades late in opening.]
However, we’re pleased to report that last week the first of eight 2,300-ton steel gates–each about nine stories high–was slid into place inside one of the six mammoth new locks that have been added to the Canal. The latest reports confirm that the project is almost 90 percent complete.
So we’re reasonably comfortable predicting that, as early as spring in 2016, the expanded crossing in the Isthmus of Panama finally will be open for business. Which means it’s worth taking a closer look at the anticipated impact of the additional 660 million metric tons of shipping that will sail through the expanded Canal–and who may benefit the most.
The most obvious winners will be the East and Gulf coast ports who’ve invested in deepening their channels and installing the huge cranes needed to service the super Post-Panamax cargo ships that will now be able to sail through the Canal. These mega-ships–some of which are three-and-a-half football fields wide–can carry more than twice the amount of cargo (12,500 TEUs, shipped in thousands of 20-foot containers) compared to the Panamax ships that hold no more than 5,000 TEUs. Several major ports are racing to achieve the required 50-foot channel depth (with sufficient channel width and turning-basin size) for the big ships. As previously reported, the Port of Baltimore and the Port of Virginia (in Norfolk) are ready to go, with at least a dozen eastern U.S. ports approaching the finish line.
But the doubling of the amount of global commerce going through the 50-mile-long Canal–from 6 percent of the total to as much as 12 percent–will impact entire countries and global resources, not just a few dozen major ports. Logistics experts predict the expanded Canal will alter global patterns of energy and food production as well as trade. Analysts also anticipate that the additional transport capacity will shift water use and supply, particularly in the U.S. and China, the primary producers and consumers of goods shipped through the canal.
A 2013 report by the U.S. Maritime Administration concluded that the expanded Canal will increase the flow of U.S. energy to China and Japan. The Canal’s new locks, all longer, deeper and wider than the original structures, will be able to welcome large new bulk ore vessels, big liquid natural gas carriers and much larger liquid petroleum and bulk chemical tankers traveling from the U.S. to Asia, dramatically increasing shipments of natural gas, propane and petroleum liquids. Coal exports from the U.S. to China also are expected to grow. The Maritime Administration study also noted that because the expanded canal and larger ships will make it less expensive to export U.S. harvests of soybeans, corn and wheat to Asian markets, American grain production should increase.
For example, as of 2012, a shipment of eastern U.S. coal from the Port of Baltimore to Xiangang, China in a Panamax vessel that fits the existing canal cost about $35 per ton; shipping the same amount of coal in a post-Panamax vessel would cost approximately $25 per ton by comparison. The overall savings on grain shipments is estimated at about $5 per ton.
The biggest “side effect” of the Canal expansion, according to Circle of Blue (a website that tracks global resources crises) may be the impact on global water supplies. International trade in farm and industrial products accounts for 2,320 cubic gigameters of water use annually, according to a 2011 study by UNESCO-IHE Institute for Water Education, a Netherlands-based water research think tank. (A gigameter is 1 billion cubic meters, or 264.1 billion gallons.) Global trade in crops contributes 76 percent to the total volume; trade in animal and industrial products contributes 12 percent each, according to the UNESCO-IHE study.
Just a four percent increase in global trade resulting from the Canal expansion could increase water usage by an estimated 174 cubic gigameters of water annually, or 46 trillion gallons–equal to a third of all the water used in the United States annually, according to the U.S. Geological Survey.
In Panama, the Canal expansion is attracting developers of mega-projects from Caribbean nations. The projects include a $6.4-billion open-pit copper mine powered by a 300-megawatt coal-fired power plant, an $8.7-billion container terminal east of Colon and a $4-billion residential resort.
The overall global economic impact of an expanded Panama Canal will be measured in trillions of dollars. The next time we revisit this subject, we should be able to give you the skinny on who’s actually getting the lion’s share of the moolah.