Amid exploding fireworks and waving flags, a Chinese ship carrying more than 9,000 containers on Sunday entered the newly expanded locks that will double the Panama Canal's capacity in a multibillion-dollar bet on a bright economic future despite tough times for international shipping.
Several tug boats pulled "Cosco Shipping Panama" into the new locks at Agua Clara under a cloudy sky in Colon province, about 80 kilometers (about 50 miles) north of the capital.
"This is the route that unites the world," said Panamanian President Juan Carlos Varela.
"This new transit route is the tip of the iceberg in making Panama once again the logistic center of the Americas," canal administrator Jorge Luis Quijano said as the ship headed for the Pacific Ocean. "And it represents a significant opportunity for the countries of the region to improve their infrastructure, increase their exports."
Thousands of Panamanians who began gathering before dawn to witness the inauguration of the canal's expansion waved the national flag as the band struck up a song.
"It's a one-time experience, a great achievement," said Felicia Penuela, a housewife from Colon province. "Panama is showing the world that even though it is a small country it can do great things."
Nearly two years late due to construction delays and labor strife, the $5.25 billion project formally launched with the transit of the 158-foot-wide (48.2 meters), 984-foot-long (300 meters), Chinese-owned container ship. It's one of the modern class of mega-vessels that will now be able to use the canal.
With 30,000 people and eight foreign heads of state expected to attend the daylong festivities, officials are bullish.
"There is evidence that the Panama Canal, with this expansion, is an important player not only for regional maritime commerce but worldwide," said Oscar Bazan, the Panama Canal Authority's executive vice president for planning and commercial development. "The canal is a winning bet. (Clients) will benefit from saving not only time but also money, because the canal is a route that shortens distance."
However, the party comes amid a lull in global shipping due to the drop in oil prices, an economic slowdown in China, which is the canal's second-largest customer, and other factors that have hit the waterway's traffic and income.
While authorities anticipate increasing commerce between Asia and ports on the U.S. East Coast, doubts remain that not all those ports are ready to handle the huge New Panamex-class cargo ships. Net cargo volume through the canal from the U.S. East Coast toward Asia fell 10.2 percent in 2015, according to official statistics. Meanwhile the Suez Canal in Egypt recently lowered tariffs by up to 65 percent on large container carriers in an attempt to keep its traffic.
"It's important to remember that the canal does not create demand. The canal opens the route. Supply and demand on a world level is what will decide whether the Panama Canal will really bring more volume or not," said Antonio Dominguez, a general manager for global shipping leader Maersk Line, which moves about 14.2 percent of world commerce. "What is certain is that the current canal has maxed out."
Maersk was among shipping companies that have reduced passages through the Panama Canal, although Dominguez said the company is considering a return.
Since the canal was handed over from U.S. control at the end of 1999, the waterway has generated about $10 billion in direct income for the Central American nation and is responsible for about 40 percent of its GDP, factoring in related economic activity. Some 35 to 40 vessels transit the waterway each day, and the canal is estimated to handle about 6 percent of world maritime commerce.
Panama began the expansion nearly a decade ago. Originally planned to open in late 2014 around the waterway's centennial, the new locks can accommodate ships that carry up to three times the cargo of those previously able to use the canal.
Grupo Unidos por el Canal, the Italian- and Spanish-led consortium that spearheaded construction, handed the project over Friday, although a series of claims are still pending for presumed cost overruns of more than $3 billion.
Paul Bingham, a shipping economist at Boston-based EDR Group, predicted the canal expansion's global impact will be small.
"The proportion of world trade that could plausibly use the Panama Canal is constrained by the geography of the world's population, resource endowments and production regions," Bingham said. "There is very little a larger canal can influence at the margin to induce shifts in the geography of world trade, even through potential reductions in costs of shipping a variety of commodities to, from and within the Americas."http://latino.foxnews.com/latino/news/2016/06/26/panama-canal-opens-5b-locks-in-major-move-to-double-its-capacity/?intcmp=hplnws
I have sat in a few presentations regarding the potential economic impact of the port expansion and it sounded a lot like Flagler bringing the railroad to Key West because all the shipping was going to offload cargo onto his train. As I recall he met very limited success and went bankrupt.
I kind of feel the same way about the Panama Canal and Port of Miami expansion. They have built a solution to a problem that doesn't really exist. Although mega container ships could not go through the old canal, I do not see why they would choose to come to Miami first over other mega ports. The distribution from Los Angeles to the rest of the USA is pretty good. However I can see Chinese containers / Asian goods transiting the canal to get to Europe or west Africa ( although the west Africa market isn't very large ).
So we have built a solution in Miami waiting for the business to come. On the other hand, Miami has one of the largest freight airports in the world.
We do it all for business and home
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Future looks bleak for giant container ships
June 14, 2016
By Adam Minter, Bloomberg News
In December, the quarter-mile-long Benjamin Franklin became the largest cargo ship ever to dock at a U.S. port. Five more mega-vessels were supposed to follow, creating a trans-Pacific shipping juggernaut by the end of May.
But thanks to a massive miscalculation on the part of the fleet's owner — there's not enough demand for all that shipping — the Benjamin Franklin made its last U.S. port visit a few weeks ago.
It was an ignominious end to an overly ambitious plan. But it shouldn't have been a surprise. The shipping industry is struggling through its worst recession in half a century, and that icon of globalization — the mega-container ship — is a major part of the problem.
With global growth and trade still sluggish, and the benefits of sailing and docking big boats diminishing with each new generation, ship owners are belatedly realizing that bigger isn't better.
That's a major change. Between 1955 and 1975, the average volume of a container ship doubled — and then doubled again over each of the next two decades. The logic behind building such giants was once unimpeachable: Globalization seemed like an unstoppable force, and those who could exploit economies of scale could reap outsized profits.
But by 2008, that logic had begun to falter. Even as global trade volumes collapsed after the financial crisis, with disastrous effects on the cargo business, ship owners were still commissioning more and bigger boats. That had ruinous consequences: This year, 18% of the world's container ships are anchored and idle (adding up to more capacity than was idled in 2009). In just the last quarter, global shipping capacity increased by 7% while demand grew by only 1%. As a result, the price of shipping a container fell by nearly half.
The news is only getting worse for big ships. A study last year by the Organization for Economic Cooperation and Development (OECD) found that economies of scale from today's mega-boats are four to six times smaller than those in previous periods of upsizing. Around 60% of cost savings now comes from engine technologies. In other words: Building smaller boats with better engines would offer more savings than going bigger.
Then there's risk. Today's largest container vessels can cost $200 million and carry many thousands of containers — potentially creating $1 billion in concentrated, floating risk that can only dock at a handful of the world's biggest ports. Such boats make prime targets for cyberattacks and terrorism, suffer from a dearth of qualified personnel to operate them and are subject to huge insurance premiums.
Yet the biggest costs associated with these floating behemoths are on land — at the ports that are scrambling to accommodate them. New cranes, taller bridges, environmentally perilous dredging, and even wholesale reconfiguration of container yards are just some of the costly disruptions that might be needed to receive a Benjamin Franklin and service it efficiently. Even when taxpayers foot the bill for such upgrades, the costs can be passed on to vessel operators in the form of higher port fees.
In recent years, mega-vessels have caused traffic jams in the water and on-shore as overwhelmed ports struggle to offload thousands of containers. The expense in worker overtime and cargo delays can be significant. Making matters worse, the bigger ships make fewer port visits, leaving operators wondering if they should invest in costly renovations for what would amount to infrequent stopovers.
But if the upfront costs look daunting, the long-term trends in global trade are what should really worry big boat owners. The OECD estimates that world trade will continue expanding in the next few decades, but at a much slower pace than it did during the golden age of globalization. A big reason why is that emerging economies, such as China, are hoping to rely more on domestic consumption and less on export-led growth.
Under such circumstances, you'd think that ship owners would start to steer clear of big boats. But, fearful of falling behind the competition and hoping to put smaller operators out of business, they're actually doing the opposite. Global capacity will increase by 4.5% this year, and by another 5.6% in 2017 — almost entirely due to new mega-vessels like the Benjamin Franklin.
Mergers and consolidation, which some shippers are pursuing, might offer a chance to keep those big ships steaming. But sooner or later, even the biggest operators will have to accept that the era of super-sized shipping has begun to fade.
Mr ****'s canal is supposed to be deeper and wider
6-10 years away from completion, if it ever gets started.
I went through it on a 721' Heavy Cruiser of 17,000 tons. One of the few times I felt small.