The Panama Canal Authority’s ongoing venture to expand one of the world’s busiest maritime routes has entered its final stages even as it considers an additional project worth up to $17 billion to allow it to handle the world’s largest ships, Reuters reported. The current phase, which is headed by Italy’s Salini Impregilo and Spain’s Sacyr, will install a third set of locks, which should be ready to open in April 2016.
Meanwhile, authorities are also looking at a project that aims to install a fourth set of locks, and the expansion would let the shipping route compete with Egypt’s Suez Canal, opening the way for so-called “Post-Panamax” ships that carry 20,000 cargo containers. Ports across the U.S. are also planning on expanding to handle the new generation of oceangoing vessels, which accounted for just 16 percent of the world's container fleet but carried 45 percent of its cargo in 2013.
“Looking at our geology and the experience we gained with this current expansion, we estimate it’s a project that could cost between $16 billion and $17 billion… adding it would allow Panama to compete head-to-head with Egypt’s Suez Canal,” said Jorge Quijano of the Panama Canal Authority. The canal brings in $1 billion in direct revenue to Panama's treasury.
Quijano said that container ship traffic coming through the canal has risen between 3 percent and 4 percent in recent months due to a backlog at ports on the U.S. West Coast, caused by a now-resolved labor dispute that had stretched on for months. “It has had a positive impact for us, but the Suez Canal has been the big winner because they can handle the Post-Panamax ships,” Quijano said.
If the canal authority approves the project, Quijano says the expansion could be completed within 15 years, and that options for financing it include issuing bonds or tapping into the canal authority’s own revenues. China Harbor Engineering Company Ltd has reportedly expressed interest in building and operating the fourth set of locks, and Quijano said representatives from the Chinese company had been meeting with him.
The current expansion plan was originally predicted to cost $5.25 billion, but costs reportedly rose as the administrator became involved in a dispute with Grupo Unidos Por el Canal (GUPC), which is in charge of building the third set of locks. Quijano said the canal had lost around $400 million in revenue due to delays caused by the dispute.
The canal is reportedly working through a major backlog of ships awaiting transit on both ends, according to the Journal of Commerce. “Several measures have been implemented to reduce the backlog,” the canal authority reportedly said, in a statement this week, “such as the suspension of all maintenance work and the addition of locks personnel.”