Despite some setbacks, expansion of the Panama Canal appears on pace for next year.
The project involves building a larger set of locks on the 50-mile canal able to accommodate “mega ship” container vessels capable of carrying up to 12,000 containers. The largest ships currently able to navigate the canal carry 5,000 containers.
Work began on the expansion in 2009, and construction is planned for completion in June 2015, nine months behind schedule and a final cost estimated at $5.2 billion, according to media reports.
The project is the most ambitious involving the canal in its century of operation.
France began work on the canal in 1881 and put 20 years into it before engineering problems and disease led to the U.S. taking over the project in 1904.
The waterway officially opened Aug. 15, 1914.
New ports of entry?
The canal upgrades could open up some new port of entry options for South American suppliers of fresh produce to the U.S. market.
Current ports of entry for Chilean and Peruvian products such as avocados, grapes and stonefruit may find some other ports looking to attract business.
Gulf Coast ports such as New Orleans or Houston both could offer access to central U.S./Midwest markets, and Houston’s Texas location and corresponding large and growing Hispanic population would be a market for Latin American staples such as avocados and mangoes.
“The expansion of the Panama Canal will mean that shipments headed to the U.S. will have the opportunity to enter through Florida or Gulf Ports,” said Ronald Bown, president of ASOEX, the Chilean Fruit Exporters Association. “The increased supply could permit other ports’ fees and services like quarantine treatments, repacking and forwarding ships to Asia to be more competitive.”
“Considering that refrigerated container technology is improving on a daily basis, it is likely that there will be a diversification in terms of ports of entry in the U.S.,” Bown added.
The Port of Miami, already a key destination for Southern Hemisphere produce loads, is undergoing an expansion project of its own to accommodate increased shipping capacity.
“Port of Miami being the closest U.S. port to the Panama Canal, in particular, has been planning and actively working on the deep dredge project in preparation for these super Post-Panamax megaships that will likely include Miami in their routes,” said Frank Ramos, owner of Miami-based customs brokerage The Perishable Specialist Inc.
“Currently, some commodities out of Chile and Peru are ‘dropped off’ in Panama by feeder vessels. Large ships proceed to pick up these containers in Panama and bring them to their final destination in the United States or elsewhere in order to reduce transit time. We expect with the megaships more space will become available so that more containers can make these connections in order to arrive in the East Coast in an acceptable amount of time for some of these highly perishable commodities,” Ramos said.
That opens the opportunity for more produce loads through the port.
“Mega ships plus mega space equals more container space availability for fresh produce,” he said.
The Spanish-led consortium handling the Panama Canal expansion said in late January that a stoppage was not being considered although it remained possible if there is no resolution to a financial dispute, according to a BBC report.
The group and Panama Canal Authority are in a dispute regarding $1.6 billion in cost overruns.
The canal authority, a Panamanian government entity that handles operations and management of the waterway, is demanding the consortium live up to the terms of the original contract, which allows the consortium to stop work only if the agreed monthly payments by the authority are not disbursed, which has not happened.
The consortium blames the cost overruns largely on problems with the studies carried out by the canal authority before work began.
Also, it says geological obstacles encountered during excavation have prevented it from getting the basalt needed to make the massive amounts of concrete required for the expansion.