As the opening of the larger, deeper Panama Canal locks is once again pushed back and now slated for some time during the second quarter of 2016, shipping and logistics providers are busy speculating on the ways it might affect the industry.
The new locks, which will accommodate container ships with capacities of up to 14,000 twenty-foot-equivalent units, are nearly triple the capacity of the canal’s century-old existing locks. The project is estimated to cost nearly $5.25 billion.
“We expect it to be open for commercial business sometime in the second half [of 2016],” said Francisco J. Miguez, executive vice president for finance and administration at the Panama Canal Authority.
The locks are estimated to be 96 percent complete, but during testing last fall, officials found leakage in a sill next to one of the new locks on the canal’s Pacific side, delaying the opening.
Double the Size, Half the Fuel
“Water transport is the cheapest form of transport,” says Eugene Landy, chairman of Monmouth RTT. “The basic efficiency of the canal is that you double the size of the ship, but you only increase fuel consumption by 50 percent.”
This means that it could soon become more cost-effective for larger ships passing through the canal to deliver goods to consumers living on the eastern side of the Mississippi River–as nearly 59 percent of Americans currently do. By streamlining logistics routes, it’s possible to reduce shipping costs, which could in turn bring down the price of goods.
Widening Markets for Midwest Farmers
The canal expansion doesn’t just promise to benefit international shippers. It could also improve shipping conditions for domestic exporters. In particular, Midwest-based agricultural exports could see a significant increase in volume.
“Bulk grains exports — especially corn and soybeans — from Minnesota to Asian markets will benefit from the Panama Canal expansion,” said Minnesota Department of Agriculture economist Su Ye. According to state records, in Minnesota alone the value of agricultural exports increased from $2.3 billion in 2000 to $7.3 billion in 2014. More than half of that came from soybeans, soybean meal, corn and animal feed.
“Success in the commodity industry like soybeans is largely a function of being able to get product to a customer at the most cost-effective and reliable manner,” said Mike Steenhoek, executive director of the Soy Transportation Coalition.
By offering a stronger link between the U.S. and global logistics, many economists see positive growth potential in the project.
Incremental Change
Even with the air of optimism, not everyone thinks that the new locks will revolutionize supply chains immediately. The project has already been delayed multiple times since it began in 2007, and even with these new promises, there are few guarantees.
“It’s an incremental change,” said Tim Feemster, managing principal Foremost Quality Logistics. “It’s going to be gradual.”
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