Slow burner

Industry Database

After nearly ten years of speculation on its global impact, the world finally has an expanded Panama Canal.

Kick-started in 2007, this mammoth undertaking has been marred by strikes, structural issues and quibbles over payments, but it overcame it all – including cracks and leaks in the very core of the new locks – to open in June.

Throughout that time, the world and his dog have been waxing lyrical about what an expanded Panama Canal will mean for world trade flows, deciding which ports will be the winners and losers in this new world order. This lengthy over-analysis can be condensed into two statements: North Asian traffic will shift from the Suez to the Panama and the US West Coast will lose out to the US East and Gulf coasts.

But that posturing and pontificating won’t stop now that larger ships are able to weave their way through the expanded lock system. Pundits will still be second guessing the effect on world trade as an expanded Panama Canal is just one piece of a very large world trade jigsaw.

While its expansion is undoubtedly historic, it’s not the only thing that influences the routes ships choose to follow and the ports they choose to call at. From fuel costs to macroeconomics and from geopolitical tensions to freight rates, there’s a myriad of factors that determine trade routes and ultimately port selection.

Add to that list labour unrest, wars, natural disasters, and company politics and you begin to see how comparatively insignificant the expansion of the Canal is. Even personal relationships and preferences have a role to play in port selection and who can predict that with any accurately?

The Panama Canal is bullish – but wouldn’t you be if you’d just spent $5.25bn to double capacity? It estimates that it can lure at least four to five weekly services from Suez. But it doesn’t give a timeline; it too, must acknowledge that the sheer fact that larger ships can traverse doesn’t mean they will.

Ultimately, despite the fanfare of the opening ceremony in June, the expansion will not be an overnight sensation and ports looking for an easy win from the expanded Canal will be disappointed. But this gives us our obligatory silver lining: those US East Coast ports that are not quite ready for the big ships still have time to play with. Certainly months, likely years, possibly even decades. This is the ultimate slow burner.

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