Panama Canal Expansion Nears Completion
WASHINGTON - Aug 6/15 --SNS - The expansion of the Panama Canal should be complete in ealy 2016, giving a potential boost to grain exports from U.S. East Coast and Gul ports, argues the USDA's Agricultural Marketing Service in the August 6 Grain Transportation Report.
The USDA writes that the Panama Canal is a vital outlet for cargo and grains shipped from the U.S. East Coast and destined for the Pacific Rim, and vice versa due to its short distance and voyage time compared to the alternatives routes such as the Suez Canal, and Cape of Good Hope.
The United States is the largest user of the canal. In 2014, over 158 million metric tons (MT) of cargo originated from or was destined for the United States, including, intercoastal shipments transited the Panama Canal. China was the second largest user of the canal with just over 52 million MT, and Chile was third with about 30 million MT of cargo. The majority of the U.S. cargo transiting the canal originated from the U.S. East Coast on its way to Asia and the West Coast of South America.
The principal commodities from the U.S. East Coast transiting the canal are grains, such as corn, soybeans, wheat, rice, sorghum and others. Grain shipments through the canal decreased in 2013, due to the 2012 U.S. drought that reduced the supply of grain available for export. Shipments increased 53% in 2014.
In recent years, soybeans have been the dominant grain shipped through the canal, followed by corn and sorghum. Soybean shipments through the canal have been strong due to the high demand for U.S. soybeans by China. A very small amount of grain passed through the canal from the Pacific Rim on its way to the Atlantic Rim and the quantity is declining. Overall, shipments of grains and other bulk materials have continued to increase through the first half of 2015.
According to the Panama Canal Authority (ACP), a record 32.8 million long tons (33.3 million MT) and 6.5 million long tons (6.6 million MT) of grain and salts transited the waterway -- an 8.5 and 43.2% increase, respectively, compared to the same period in 2014. Sorghum shipments, with an 85.5% increase over a year earlier, had one of the highest increases. Most of the grain trade originated from the United States, while bulk salt shipments originated from Chile and Mexico's West Coast on the way to U.S. East Coast ports.
Panama Canal Expansion Project and Beyond
In 2007, in an effort to increase the capacity of the canal, the ACP began the largest expansion project in the canal's history at a total cost of $5.2 billion. The project creates a new lane of traffic, constructs a new set of locks, and doubles the waterway's capacity. Currently, the canal only allows the passage of Panamax vessels, which can carry up to 5,000 Twenty-Foot-Equivalent-Units (TEUs). When the project is complete, Post-Panamax vessels -- that can carry up to 13,000 TEUs of cargo -- will be able to pass through the canal.
Grains leaving the U.S. East Coast ports to Asia are usually transported in Panamax vessels, and the typical grain shipments are 55,000 metric tons (mt) of cargo. A Post-Panamax vessel with 80,000 - 110,000-ton capacity may load up to 85,000 mt of grain depending on the destination ports. The expanded canal will also reduce the Canal Water Time (time it takes a vessel to transit the canal). The economies of size in loading and reduced Canal Water Time may translate into lower or reduced transportation costs in the long run. Since a majority of the U.S. grain transiting the canal on its way to Asia originates from the East Coast and Gulf ports, these ports stand to benefit from the canal expansion.
And as a result, there could be increased barge movements down the Mississippi River and rail movements to Texas Gulf. During the first half of 2015, 8% more dry bulk vessels transited the Panama Canal for a total of 66 million long tons (67.1 million MT). Finally, an expanded canal will likely benefit the U.S. exporters and foreign buyers through reduced transportation costs and landed costs. As of June 30, 2015, the expansion project is 91.3% complete, and is expected to be fully complete early in 2016.
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