Panama Canal: Expansion and Impact

WSJ says, while it won’t do anything to help the dire state of the industry near-term, the changes are critical to Western trade in the long run.

The canal, which handles about a third of Asia-to-Americas trade, had no choice but to expand. As the industry copes with its downturn, major shipping companies are pooling their resources and using fewer but much bigger ships—ones that are too large to fit through the pre-expansion Panama Canal.

According to the Economist,  the revenue it receives each year from the Panama Canal Authority (ACP) is expected to double to around $2 billion in 2021. This is a country that knows how to reap the benefits of its geography.

The ACP will be able to charge more for passage to bigger ships now that massive new locks have been built at both the Pacific and Atlantic ends of the canal and channels have been deepened and widened. 

The $5 billion venture will be inaugurated on June 26th when the first vessel officially sails through. The widening of the canal was initially mooted before the second world war, but became more urgent as ever larger ships were unable to use it.

The expansion makes the Panama Canal more competitive with the Suez Canal in Egypt, shortening the one-way journey by sea from Asia to the U.S. East Coast by roughly five days and eliminating the need for a trip around Cape Horn to get to the Atlantic.