Panama Canal Expansion a ‘Game Changer’ for Trade

The coming expansion of the Panama Canal from two lanes to three is being called a “game changer” and will have impact around the world by shifting the nature of global trade patterns, McClatchy News reported.

The 50-mile canal will gain a third lane that can accommodate larger ships, and ports around the world are being adapted to handle the increase in the size and reduced speed of the ships, McClatchy reported.

“It’s been said that it’s a game changer. Yes, it is,” Alberto Aleman, an engineer who has been administrator of the canal for 16 years, told McClatchy.

The Panama Canal in 1914 joined the Atlantic and Pacific oceans, changing international trade by creating a shortcut for ships that previously had been forced to make the journey around the southern tip of South America.

The Canal is constrained and no vessel longer than 965 feet, wider than 106 feet and with a draft greater than 39 feet can pass through. But when the third lane opens in late 2014, the canal’s capacity will more than double, McClatchy reported. Ships as long as 1,200 feet and up to 160 feet wide, with drafts as deep as 50 feet, will be able to go through. As a result, vessels will be able to transport as many as 13,200 containers, or at least double the dry weight of bulk cargo that can pass through now.

“The economies of scale mean it is only one ship moving twice the amount of cargo,” Aleman told McClatchy.

The Panama Canal transports four percent of world trade and 16 percent of total U.S.-borne trade. Between 12,000 and 15,000 ships cross the Canal every year.

In the U.S., the widening “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,” McClatchy reported, citing an Army Corps of Engineers study.

A wider Canal will also help the transportation of coal from Colombia and iron ore from Brazil, which will be able to take the material to China through Panama at a lower cost, which will boost those industries, according to McClatchy.