The Panama Canal & International Shipping Traffic

Anyone who drives through densely populated areas knows the frustration of traffic jams. There are stretches of roads notorious for frustrating drivers and making perfectly punctual people late for their appointments. In Los Angeles, it’s the 405; New York has the Cross Bronx freeway; and the Dan Ryan Expressway in Chicago is anything but express. As bad as it is to sit on one of these stretches of road and look out to see nothing but brake lights on lines of cars, there is a worse traffic jam to be in. Imagine being on the ocean and as far as the eye can see on a never ending horizon are fleets of ships—giant ships in uncountable numbers. All these ships are waiting to cross one relatively small strip of water. All the ships have a schedule and are loaded with valuable cargo. None will reach their final port of call on time. This is the scene all too often at the Panama Canal and the frustration of international shipping traffic.

For nearly 100 years, the Panama Canal has served as the major passageway between the Atlantic and Pacific Oceans for carrier ships. As world trade has increased over the last century, the Panama Canal has been pushed relentlessly toward its capacity. The Panama Canal is quite impressive in size; it allows ships 965 feet long, 106 feet wide, and 39.5 feet deep to cross the isthmus connecting North and South America. Since the opening of the canal, many ships of this maximum size, called Panamax, have been built. While these ships are massive—more than the length of 8 football fields combined including end-zones—ocean carriers think bigger. We now live in a post-Panamax world with megaships well beyond the size of anything the builders of the Panama Canal would have had in mind as they were building. With the increase in traffic from a booming world economy and the increase in size of ships, the only thing to do is expand the Panama Canal.

The expansion plan that is currently being implemented is supposed to double capacity of the canal by 2015. It will be great news for ocean carriers when this work is complete, allowing more cargo to pass through the canal efficiently. On the other hand, the construction will be nervously watched during the next four years. Who hasn’t experienced delays on the road because of construction? Routine maintenance causes backups at the canal that result in bidding wars ending in the hundreds of thousands of dollars to allow ships to skip ahead in line. Imagine the result of full shutdowns to the canal. You’ve probably taken at least one really bad detour on a trip, but imagine this: the detour around South America would be 7,872 miles long. Carriers already struggle with reliability of ship schedules and have rates that are notoriously volatile. As the expansion of the Panama Canal continues over the next four years, will we see increased unreliability and hiked prices? We’ll have to watch and see.