Panama Canal Won't Be Hurt by Not Catering for Mega-Ships

ULCS traffic could saturate the canal if a fourth set of locks was built

The expanded Panama Canal will not necessarily suffer because it cannot handle new ultra large container ships (ULCSs), according to an analysis by The Bulletin Panama.

Construction of a new set of locks aimed at increasing the capacity of the Panama Canal began in 2006, but it will not be able to handle the largest container ships now in use.

Since 2006, appetites for larger vessels have exceeded expectations, said Carlos Urriola, Senior Vice President of U.S.-based terminal operator Carrix, Inc.

A number of major shipping lines are said to have more than 30 box ships larger than 18,000 twenty-foot equivalent units (TEU) either operational or on order for delivery by 2018.

Furthermore, Lloyd's Register late last year said 24,000 TEU ships were on the horizon.

Some have suggested this will hurt the Panama Canal's competitiveness unless a fourth, additional, set of larger locks is constructed.

But "the need for a fourth set of locks is not directly related to the growth of container ships," said logistics expert Rodolfo Sabonge, rector of the Universidad del Caribe.

Demand for the new locks already being constructed will come from gas carriers, bulk carriers, tankers, and car carriers, he said, adding "increased demand for the Canal route may saturate it, which would negatively affect its ability."

Increased Demand May Saturate the Canal

Rather than adding new locks to chase custom from ULCSs, Panama should concentrate on building competitive infrastructure such as ports to handle post-Panamax ships as well as improving land transport connections.

This, he said, would attract a wide range of marine traffic to use Panama as more than just a cut-through.

"If we are not competitive, we will see the ships move through the Canal without major benefits for the country," said Sabonge.

In September, APM Terminals said interest is building for the construction of an alternative canal in neighbouring Nicaragua, which could handle larger ships, but it is understood that financing has not yet been secured for the $40 billion undertaking.