Dueling canals

The Panama Canal has long been a boon to shippers despite the increasingly glaring problem of the size restrictions. With the current expansion program set to be completed this year, Panama hopes to be open to more and larger vessels than before. At the same time Nicaragua is reviving its dreams dreams of an interocean canal with the help of a Chinese billionaire.

In late December, Nicaraguan President Daniel Ortega and Chinese telecom entrepreneur Wang Jing formally inaugurated work on what they said would be a 173-mile-long waterway capable of handling the world’s largest ships as they pass between the Atlantic and Pacific oceans.

Mystery surrounds the Nicaraguan project, especially how Wang plans to finance a canal that’s expected to cost $50 billion, and perhaps more. Many Western experts suggest China’s government may eventually emerge as the project’s patron.

The Nicaragua project comes as Panama is doubling its canal’s capacity, adding a third set of locks to accommodate ships more than twice as big as in the past. The $5.25 billion expansion is 85 percent complete and expected to be operational early next year.

Outside maritime experts say Panama has reason to be concerned about an eventual rival canal in Nicaragua.

“If it actually gets built, and it is run in a reasonable manner, they are going to get business,” said Richard Wainio, the former director of the Port of Tampa, in Florida, and a shipping consultant. “People will use it, and Panama will lose business.”

But Miguez said Panama Canal experts suspected Nicaragua was mistaken in thinking it would draw supertankers and container ships that were larger than those that would fit through the expanded Panama Canal.

“Our preliminary assessment is that there is not (a market). You don’t see trends right away going to bigger than 14,000-container vessels. There’s no trend moving in that direction,” Miguez said.

Panama Canal Administrator Jorge L. Quijano said in mid-2014 that the expansion would allow the passage of 98 percent of the current world fleet of ships.

Basically, the two countries are wagering on whether cargo ships will grow ever larger and trade routes will adjust as ports invest in deeper channels and bigger gantry cranes to handle the super ships.

Since the 50-mile-long Panama Canal began operating in 1914, the largest ships that could fit through the locks were called Panamax vessels, equipped to carry about 5,000 20-foot containers. After the expansion, the largest ships that will fit, which are known as post-Panamax and are the length of aircraft carriers, can haul 13,000 to 14,000 such containers.

Miguez said the post-Panamax vessel’s size hit the current sweet spot.

“It’s a vessel that provides very good economies of scale. It’s an efficient vessel. And it’s also a flexible vessel. That means it can be loaded and unloaded within reasonable times in ports,” he said.

If Mr. Wang is not just another Hong Kong hustler, the battle of the dueling canals should be a boon to shippers.