The Suez Canal is scheduled to be wider and deeper by the end of the northern summer, but the potential time and cost savings for shippers and carriers is not a concern for Panama Canal Authority CEO Jorge Quijano.
Quijano, who views the Suez as a primary competitor with the Panama Canal for US east and Gulf coast container imports, has estimated that the Suez expansion could reduce transit times there by about four hours.
But once the Panama Canal opens its own new set of bigger locks in April 2016, “we just don’t see that [the Suez expansion] will be a major factor”, Quijano said at a presentation at the Center for Strategic and International Studies in Washington, DC, on 20 May.
The $8.5 billion Suez expansion project, being built by a consortium of dredging and construction companies, will create a parallel waterway to allow for two-way vessel traffic, thus reducing vessel waiting times.
The expansion is expected to be operational by the end of the summer.
How much the Suez expansion will affect competition for trade into the US during the months leading up to the Panama Canal opening is unclear. But the current advantage the Suez Canal holds for most post-Panamax container ships trading in the US east and Gulf markets will be gone next year, Quijano said.
“We expect to get additional tonnage,” Quijano asserted. “But we also believe that the US economy is growing, so we’re banking on growth that will be beneficial not just for us but for US west coast ports as well.”
Quijano seemed just as unfazed by other potential sources of competition. A rival canal through Nicaragua backed by the Chinese government, which the Panama Canal Authority has estimated will cost $60-70 billion, would require removing as much material per day as would be “equal to building one and a half Egyptian pyramids”, he said. In addition, “if they ever come online, they would have to charge double our tolls in order to get a return on their investment”.
Another potential project, a “dry canal” railway linking Brazil to Peru’s Pacific coast that is intended to lower transport costs for Brazilian exports to China, is also not a threat, according to Quijano.
“We love competition, but land transportation will never compete with all water routes. They may take some business away, but it won’t be a substantial amount.”