Stalemate on canal project broken
The expansion of the Panama Canal, 100 years after its inauguration changed global trade and shipping, is spawning a new generation of container ships the length of four football fields.
But just as the initial construction of the canal linking the Pacific and the Atlantic suffered from epic challenges – the death of about 27,000 workers from disease and the bankruptcy of the French company that started it – the expansion project has had problems that have echoed around the world.
A dispute between the Panama Canal Authority and the Spanish-led consortium over US$1.6 billion (NZ$1.91b) in cost overruns threatened to set back the completion date by years and throw into disarray the schedules of super-carriers.
When work resumed on the huge expansion project in the past week as the two sides edged towards a resolution of the dispute, the world’s ports and shipping companies drew a sigh of relief. Billions of dollars have been sunk into upgrading ports for the new breed of mega-vessels that will transform shipping lanes along the United States eastern seaboard and bolster global trade.
The port of Miami is spending US$2 billion on dredging and enhancing its facilities, including the construction of an underwater tunnel for trucks ferrying goods to the post-Panamax monsters that will use the new canal.
While the so-called Panamax ships – those that squeeze through the 80.4km waterway – can carry 4500 20-foot containers, the new mega-vessels will be able to ship 13,200 containers each, making global trade cheaper.
Rivers along the eastern coast of the United States are being dredged and deepened and bridges raised to accommodate the new giant ships, while the boom in US natural gas from ‘‘fracking’’ is driving the construction of giant tankers to feed Asia’s demand for Unlock the gates: The first four new gates for the Panama Canal’s third set of locks arrive on a cargo ship in Colon in Colon City. Photo: Reuters cheaper fuel.
The canal’s expansion, backed in a national referendum in Panama in 2007, is expected at least to double the current billion-dollar annual revenue from the waterway. That has led to an economic boom in Panama, and any threat to the canal’s completion was seen as a direct threat to the country.
When the consortium led by the Spanish company Sacyr downed tools and demanded more money to complete the job, Panama’s President Martinelli threatened to take up the issue with the Spanish Government. The stoppage wiped 90 per cent off shares in the Spanish company.
Jorge Quijano, Panama Canal administrator, said last week that a preliminary deal had been reached, with work expected to be completed by the end of 2015.
Adding to the pressure on the canal, Nicaragua hopes to break ground this year on a rival canal that would be ready in a decade to challenge Panama’s dominance of inter-oceanic shipping. The US$40 billion tender went to the Hong Kong Nicaragua Canal Development Investment Company, which plans to build a waterway three times the length of the Panama canal.