Panama opens expanded canal to newer, bigger ships

[COCOLÍ, Panama] Panama on Sunday declared its century-old canal open to a new generation of supersized cargo ships after nearly a decade of massive expansion works aimed at capturing burgeoning US-Asia trade routes.

A giant Chinese-chartered freighter made its way along the 80km waterway linking the Atlantic and the Pacific oceans to show how it has been fitted out with an extra shipping land and gargantuan locks to accommodate vessels of its size, known as Neopanamax ships.

President Juan Carlos Varela, who hailed the renovated canal as "the route that unites the world," was to lead a glitzy ceremony attended by a dozen heads of state and various other foreign dignitaries.

Thousands of ordinary Panamanians crammed canalside stands to cheer the occasion, over which pop music blared in the tropical heat. Many held national flags, as well as umbrellas to ward off passing showers and sunshine.

The United States - builder of the original canal, which opened in 1914 and is still in operation alongside the additions - was being represented by the US ambassador to Panama and Jill Biden, the wife of the US vice-president.

The United States and China are the two most frequent canal users.

The expansion work was carried out since 2007 and finished two years late at a cost of at least US$5.5 billion.

"For us it is a day of much joy after all that we have been through," said the director of the Panama Canal Authority, Jorge Quijano.

He was alluding to disputes with the European consortium that carried out the expansion and is demanding compensation for cost overruns, which could reach hundreds of millions of dollars.

Neopanamax freighters can carry up to three times the cargo of older and smaller Panamax ships. Cruise ships built to the same dimensions typically double the number of passengers of the previous iteration.

The expansion will also allow Panama to lure massive liquified natural gas (LNG) tankers for the first time.

They represent a lucrative segment of the shipping market whose importance has grown with the development of US exports of natural gas from shale, most of which head to Japan and South Korea.

Mr Varela said on Saturday the first LNG vessel is scheduled to cross the canal next month. He predicts that many more will follow.

Panama's plan behind the expansion is to triple the US$1 billion in revenue it currently gets from canal shipping fees.

However, that goal might still be a decade away, according to officials from the Panama Canal Authority, the autonomous government agency that runs the waterway.

For some, Panama might have been overly ambitious in calculating how fast it will see its investment pay off, particularly amid world shipping prices that have dropped due to capacity oversupply.

"Everybody is always overly optimistic," said Peter Shaerf, deputy chairman of Seaspan Corporation, a container ship group with a fleet of 100 vessels, more than half of which are Neopanamaxes.

But regardless of the cost, he told AFP, the augmented canal is "wonderful" and "will have a huge impact on trade." The expansion is "one of the engineering wonders of the world," said Shaerf, speaking at a lavish party held late Saturday for canal clients and investors.

Another guest, Susan Antz, senior loan officer for the European Investment Bank, said the US$500 million credit her institution had extended for the expansion project was "money well spent."

For Panama, the feat is a source of national pride, symbolising the country's enviable modernity compared to neighbors, and its consistently high economic growth.

The government hopes the glitz and historical nature of the broadened canal will help overshadow the blow the country took to its reputation this year with the "Panama Papers" scandal.

Revelations of offshore companies started by a Panama law firm, and used by the world's rich and influential to dodge taxes and stash assets, have become the first thing many people think of when the Central American nation is mentioned.

But the canal, and the work to develop it for modern trade, is "the real face of Panama," Quijano, the Panama Canal Authority chief, told AFP this week.

AFP