Panama Considers 4th Set of Locks to Handle 20,000 TEU Mega Ships

by Ship & Bunker News Team
Tuesday March 31, 2015

The Panama Canal Authority (ACP) last week revealed it is considering building a fourth set of even larger locks in order to compete with the Suez Canal, Reuters reports.

The plans, which are understood to be at a very early stage, seek to enable Panama to cater for ships of around 20,000 twenty-foot equivalent units (TEU) in capacity.

"Looking at our geology and the experience we gained with this current expansion, we estimate it's a project that could cost between $16 billion and $17 billion," said ACP head Jorge Quijano.

The ACP is currently underway with the construction of its third set of locks which are expected to enable the route to handle Post-Panamax ships from 1 April 2016.

Widely reported congestion at U.S. West Coast ports has pushed 3 to 4 percent more traffic through the Panama Canal in recent months, but the boost has been limited due to capacity constraints, said Quijano.

"It has had a positive impact for us, but the Suez Canal has been the big winner because they can handle the Post-Panamax ships."

Quijano said the project could be completed within 15 years if it goes ahead.

Financing options include using revenue from the Canal's operations as well as issuing bonds, while a state-owned Chinese company China Harbour Engineering Company Ltd. has voiced interest in building and financing a fourth set of locks.

Quijano said he had met company officials last week.

Meanwhile, the building consortium responsible for the current expansion project Grupo Unidos Por el Canal (GUPC) is understood to have said it may not be willing to build a fourth set of locks.

Quijano said disagreements with the group have already led to overruns in the budget and cost $400 million in lost revenue from delays to the timetable.

"The big question for any future expansion of the Panama Canal is will trade growth sustain that extra investment," said Robbert Jan van Trooijen, Latin America and Caribbean CEO for Maersk Line, one of the Panama Canal's major customers.

"For me, to see any of those (mega) ships coming near Latin America, that's the very distant future."

Last month, Panama experts said the expanded canal will not be hurt by not catering for ships larger than Post-Panamax.

Earlier this month, Maersk Line CEO Soren Skou said 25,000 TEU ships are possible but will not be practical any time soon.