Panama Canal Expansion Boosts Capacity by 2016

Major ports saw immense backups of ships needing to load and unload as a result of labor shortages and other factors instigated by the Coronavirus. Although important ports in the U.S., EU and China are investing in increased capacity, changes and improvements take years to complete. Meanwhile, the world’s supply chains are generally operating in crisis mode due to shortages of everything from truck drivers to dock space for containers.

China’s immense success in becoming a sophisticated manufacturing center for export products initially meant exponential growth in the number of ships coming in and out of Asia. In December 2005, China opened phase one of its new Yangshan Deep Water port near Shanghai. In late 2020, it opened a final phase to become the world’s largest container port, at a cost of $20 billion. The port has the capacity to handle 20 million TEUs yearly. Offering deep water of nearly 50 feet, the new port is located among a small group of islands about 20 miles offshore. One of the longest bridges in the world now connects the port to the mainland for truck traffic.

Competition is fierce among port facilities. Giant new ships like the Triple-E require constant capital investment at ports that want to remain competitive. Los Angeles and Long Beach together are investing more than $5 billion on infrastructure improvements to handle larger ships. As part of the improvements, Long Beach constructed Middle Harbor, a 321-acre container terminal that will be able to handle ships of up to 18,000 TEUs. The project was completed in August 2021.

Rotterdam, Netherlands, Europe’s most vital port, has its own growth plans. The port of Rotterdam is investing $12.4 billion to add 7.7 square miles more land to its facilities by dredging and filling, while building an array of new docks, warehouses, terminals and refineries. Its eventual capacity will be 8.5 million TEUs per year. Expansion will be completed by 2033.

Smaller ports are feeling the pain of competition from larger ports. Ports in cities such as Portland, Oregon; Seattle and Tacoma, Washington; Jacksonville, Florida; and Baltimore, Maryland are trying to keep ships from changing routes into bigger rivals with little success.

The Panama Canal, which celebrated its 100^th anniversary in 2014, completed a 10-year, multi-billion-dollar expansion, thanks to the approval of Panamanian voters in October 2006. The canal expanded from its former 108-foot wide locks (which were unable to handle the massive Post Panamax dimensions of many of today’s container ships, tankers and cruise ships) with a third set of much larger locks. According to the Panama Canal Authority, the project doubles capacity. The steep price tag for the expansion will be paid for by increases in tolls. Funding was provided by a group of lenders headed by Japan Bank for International Cooperation, the European Investment Bank and the Inter-American Development Bank.

Another positive of the new, third-channel locks is that they have two sets of gates on each side, allowing the Canal Authority to take one offline for repairs while keeping traffic through the locks moving. Existing channels and locks have been modernized as well. This is a very significant development. Post Panamax ships that previously were forced to go around Cape Horn at the tip of South America in order to cross from the Pacific side of the Americas to the Atlantic side will be able to shave thousands of miles off their voyages by using the enlarged Panama Canal. Some of the shipping that now unloads at Pacific Coast ports will pass through the enlarged canal instead, unloading at Gulf Coast or East Coast ports.

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