Within the next decade, however, these locks will be replaced by structures more than twice as large and container liners such as the Antwerpen will be relative minnows, dwarfed by a new generation of mega ships, known in the shipping trade as “post-Panamax”.
A referendum last autumn gave the Panamanian government a political mandate to press ahead with a $5.25bn expansion project, the country’s most ambitious public works since the canal itself was built in the first decade of the 20th century. Earlier this month, the government-owned Panama Canal Authority awarded the first of five excavation contracts and, if all goes according to plan, the new third set of locks will operating by the end of 2014, doubling the canal’s capacity.
Over the next two to three years, other contract decisions will follow, including those to dredge deeper channels in the canal and build and instal the gigantic steel and cement lock systems that will be among the biggest in the world. “We are going as fast as possible without interrupting transit,” says Dani Kuzniecky, the minister for the canal and president of the authority’s board.
The case for expansion is a simple one. Since the beginning of the decade traffic has risen rapidly, increasing from about 220m PCUMS tons (a measurement based on volume rather weight) in 2000 to more than 300m PCUMS today, perilously close to the Canal’s 325m PCUMS capacity. Anel Samañiego, the 43-year-old captain of the Walker, one of the tugs that pushed the Antwerpen into place, remembers a time in the mid-1990s when the early morning 4am shift was relatively quiet but says that no longer holds true. “It has just got busier and busier. It doesn’t matter what time of day or night.”
The growth in business reflects an increase in global trade, especially from the manufacturing centres of Asia to north America and Europe. Until the 1980s, traffic on the canal was basically north American. Now, more than 40 per cent of cargoes are goods from Asian manufacturing centres, Japan, South Korea, Taiwan and increasingly China to the east coast of north America and Europe.
China’s accession to the World Trade Organisation in 2003 was a particularly important trigger for new business. “You can see the influence of China over the past seven years. It is almost mind boggling how it has evolved,” says Jorge Quijano, the director of the expansion programme at the authority. Asia’s rise has also changed the nature of the cargoes. The container trade accounts for about 52 per cent of the traffic compared to less than 25 per cent in 2000. Indeed, since 1995, the average number of container ships using the canal each year has nearly trebled.
Planned toll increases averaging 3.5 per cent per year for the next 20 years is providing most of the money for the expansion. In addition, the authority will begin an international borrowing programme designed to raise up to $2.3bn on the international financial markets from 2009. Recent improvements in Panama’s sovereign credit ratings make it likely that these issues will attract an investment grade reducing the cost of funding, according to analysts at the London-based Economist Intelligence Unit.
Officials at the authority also insist that the process by which contracts are being awarded will be transparent. Although the award this month of the first “dry excavation” contract to Constructoras Urbanas,a local company with which Alberto Alemán, the authority’s administrator, has been connected, sparked critical local press coverage. However, officials at the authority says Mr Alemán sold his shares in Constructoras when he assumed his job at the authority precisely to avoid any conflict.
“You have to be transparent. We didn’t have a choice,” says Mr Kuzniecky. The Constructoras bid, he says, was lower – by almost 50 per cent – than the highest of 10 rival bids. Mr Kuzniecky says Constructoras has benefited through its knowledge of the local market and the fact that it will not need to bring construction equipment into the country. “The rival bidders did not know the local market. The local company knew exactly what its costs were and wanted to win for the prestige.”