Panama Canal expansion to boost China-Americas trade

GMT 13:06 2015 Saturday ,18 July

Arab Today, arab today Panama Canal expansion to boost China-Americas trade

Panama Canal
Panama City - XINHUA

Panama Canal's expansion project, which is expected to be completed in 2016, will boost the Chinese shipping industry and trade between China and the Americas, experts said in recent interviews with Xinhua.

The 80 km Panama Canal, which was completed and opened in 1914, has been serving as a "world bridge," connecting the Pacific and Atlantic cutting down the overall distance by as much as 10,000 km between the two oceans. The canal currently accounts for 5 percent of global trade volume, which mostly involves trade between Asia and the Americas, according to the Panama Canal Authority (ACP).

International trading and the shipping industry have undergone drastic changes in the past century, and over half of the world's freighters are too big to go along the Panama Canal.

The canal's Panamax ships are determined principally by the dimensions of the canal's lock chambers which are no more than 320 meters long, no more than 33 meters wide and has a draft no more than 12 meters deep.

To meet the demand of the growing Asia-Americas trade, the Panama Canal began its 5e billion dollars expansion project in 2007 and is planned to open to commercial shipping in the spring of 2016.

Upon its completion in 2016, the canal will be able to accommodate Post-Panamax ships which are larger than Panamax ships. These ships will increase the canal's annual capacity from the current 300 million tons of cargo to 600 million tons. Around 17, 000 vessels will pass through the canal every year, up by 21 percent from the current 14,000 vessels, according to ACP.

The expansion of the canal means more and bigger ships will be able to pass through the canal, which is good news for Chinese shipping companies, said Wei Chunfeng, manager of China Ocean Shipping Company's branch in Panama (COSCO Panama).

China is the canal's second largest client, after the U.S. and the volume is still rising, according to U.S. Department of Transportation's figures.

Panamax vessels have a cargo capacity of up to 5,000 twenty- foot equivalent units (TEU) only, but after the expansion, the canal will be able to handle vessels with a cargo capacity of up to 13,000 TEU, ACP said.

"The shipping cost of each TEU will be lower," said Wei, whose company is the canal's most important Chinese client.

In addition to lowering the cost, the expansion can also alleviate the current detainment problem. At present, only around 40 vessels can pass through the canal everyday but there are about 100 ships on the waiting list. The expansion will allow more vessels to get the use of the canal.

"To shipping companies, being able to transport more cargo at a lower cost is very important. Most Chinese products available in American supermarkets are shipped through the Panama Canal. And an expanded canal will definitely benefit trade as using larger ships will make it less expensive to export Chinese products to the Americas," said Wei.

A bigger canal will not only boost China's exports to the Americas but also provide better access for China to import from the region.

Soybeans from Brazil and corn from the U.S. will be shipped to China at lower prices, as well as the energy shipments like coal, natural gas and oil.

At present, shipping Venezuelan oil to China takes 45 days via the Atlantic and the Indian oceans because the oil tankers are too big for the Panama Canal. However, after the expansion, the canal will allow most oil tankers pass through, cutting the shipping time from Venezuela to China to 30 days with a lower cost.

Experts believe the Panama Canal is important for China's energy security, as it provides another route besides the Strait of Malacca in Southeast Asia.

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