As the new era in global trade continues to increase business in U.S. Ports, across the globe, two routes through which a majority of world’s sea trade flows are getting even bigger thanks to significant investments for expansions. The Suez and Panama expansions will shorten transit times and increase the capacity at both canals to handle larger vessels.
Panama and Suez Canals by the Numbers
|Global Sea Trade Handled
|To be determined
Competition between the two for traffic along the Asia-North America route should provide carriers with more flexibility and improve reliability. Not only have East Coast ports in the U.S. been booming this past year with help from West Coast labor issues and continued port congestion, but their capacity to accommodate larger ships also accounted for the surge in traffic from Asia passing through the Suez Canal. However, some researchers believe that this trend is already reversing because just over half the available slots from Asia to the U.S. East Coast are served via Panama and carriers are building more services in preparation for the opening of Panama’s expansion in 2016.
As the world awaits the opening of the Panama expansion, last week Egypt unveiled its “Gift to the World” with the opening the Suez expansion. This historic day for Egypt replete with pomp and pageantry demonstrated that the Suez Canal is well placed to compete with Panama for Asia to U.S. East Coast business.
The Suez Canal Authority (SCA) plans to entice lines to use the Suez Canal through promotional offers and discounts. In addition to these incentives, the results of Suez expansion offer some of the best benefits to compete with Panama for Asia to U.S. East Coast. The Suez Canal tolls are less expensive and it now has the capacity to handle larger vessels. Even after the Panama completes expansion, the Suez Canal will still have the upper-hand in terms of larger vessels.
Both governments have optimistic predications with the increase in transit revenues. By 2025, projections are for Panama to earn $4 billion a year from the tolls and the SCA has forecast revenues from the Canal to rise 260% to $13 billion by 2023. The SCA also claims a potential windfall of $13.5 billion dollars in increased transit revenues over the next five years through the development of new economic zones around the canal.
Many analysts are skeptical of this prediction because they feel “returns from Suez could be hit by the completed expansion of the Panama Canal next year.” This analysis was in jeopardy as the Panama Canal Authority dealt with another pending worker strike. The Panama expansion has been marred by monetary disputes and work stoppages since the project broke ground, but fortunately both sides agreed to new terms this past week and the project is back on pace to be completed in early 2016.
The real winner from this competition will be global sea trade. The scale and cost benefits make the Suez more attractive for Asia to U.S. East Coast ports even though the U.S. West Coast still remains the most widely used gateway for Asian container imports. Only time will tell how these expansions will continue transform global trade.