Transport

Revisiting the Panama Canal in 2023

Seven years since the Panama Canal underwent its largest ever expansion, we take a look at how it continues to shape Atlantic-Pacific trade.

Image credit: Shutterstock / Solarisys

Upon its inauguration in the early 20th century, the Panama Canal was considered an engineering marvel, with a considerable impact on the Atlantic-Pacific trade route.

Nearly 110 years onward, it is still an imposing structure with a central place in international trade.

The canal saw just under 15,000 transits of oceangoing vessels in the fiscal year 2022, with the total collected tolls surpassing USD3 billion.

It is expected that by the end of 2023 the figures will grow still higher.

Despite all that, we have never stopped thinking about possible improvements on the Panama Canal. Currently, it may take up to 24 hour for vessels to transverse the 80-kilometer long canal which snakes across the isthmus of Panama.

What is more, the canal depends on a complex array of a dozen water locks and chambers, which limit the size of the vessels and the throughput rate—since the operation of locks and the filling of chambers is time-consuming.

With a view to making the Panama Canal more efficient, the isthmus has seen various expansion programs to increase the canal’s traffic handling over its 110-year long history.

The last expansion project was completed back in 2016 with a price tag of USD5.5 billion, which virtually doubled the canal’s capacity. Both lanes were widened and deepened, allowing larger ships to pass through, hence the introduction of the New Panamax standard (also known as Neopanamax).

Thanks to the upgraded size of locks and chambers, the New Panamax class of ships can be as long as 1,200ft (427m) and 160ft wide (49m), according to the Panama Canal Authority.

The New Panamax class can carry up to 14,000 twenty-foot equivalent units (TEUs), which is a significant upgrade compared to the old Panamax standard of 5,000 TEUs.

It is fair to say, therefore, that the Panama Canal’s expansion project in 2016 was a game-changer in maritime transportation.

Shipyards across the world have already launched hundreds of New Panamax class ships, with more under construction.
Several major ports, including the US ports of New York, New Jersey, and Baltimore underwent an overhaul to accommodate the New Panamax class of ships.

Despite all the challenges, however, the expansion project had a positive impact on the global economy. It decreased the cost of trans-ocean shipping by allowing significantly larger cargo ships to make the journey through the isthmus of Panama.

This has also made maritime transportation more eco-friendly.

“The Canal’s all-water route requires fewer cargo movements compared to freight transportation via air, truck or rail.

Given the shorter traveling distance and larger TEU capacity it offers, the Canal reduces fuel consumption and therefore emissions,” noted the Maritime Executive in a recent article on the occasion of the seventh anniversary of the canal’s reopening.

But are there any further expansion projects in order?

Well, not quite in the way it happened in 2016. No new colossal reinforced concrete chambers are under construction. However, the Panama Canal Authority is continually making improvements in its transit management system.

Since 2016, the world has seen the commercial application of IoT, machine learning, and blockchains in transportation management, and the Panama Canal has adopted many such technologies over the last seven years.

The canal now uses IoT for “higher situational awareness,” enabling the canal’s command and control center to make better decisions in real time.

The canal’s IoT infrastructure was developed by the transportation technology company, Quintiq, starting in 2017. “The Quintiq system should shorten vessel waiting times, increase the number of potentially available vessel slots each day, and improve the overall reliability of the route,” observes ZDNet—a business technology analyst.

The use of technology to make the canal more efficient and greener is well-placed, as environmental challenges are currently the main threat to its continued operation. In September, 2023, the Panama Canal Authority had to reduce the vessel transit quota due to severe drought across the isthmus of Panama, which had lowered water levels.

“Daily ship crossings on the Panama Canal, one of the world’s main maritime trade routes, will be reduced to 31 from 32 to soften the impact from a severe drought that is expected to last until next year,” reported Reuters in September, 2023.

The environmental issues are evidently undermining the increased capacity which has been achieved since 2016. The Panama Canal Authority is currently exploring “options through technology and new water sources to combat drought conditions,” reported SeaTrade Maritime News in October, 2023.

“We do not want to be overly optimistic! I think there is a limit, as I mentioned; we have to preserve water in order to overcome the dry season when it continues,” added the canal’s chief administrator, Ricaurte Vasquez Morales to SeaTrade Maritime News.

This underlines the serious threat that climate change imposes on maritime transportation, which is a critical link in the supply chain of a whole host of products that we rely on.

With the failure of some alternative Atlantic-Pacific maritime routes such as the Nicaragua Canal, the Panama Canal is our best bet in the foreseeable future. With 7% of global trade passing through the Canal, the world should ensure its continued operation at all costs.

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