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The $5.25 billion expansion of the Panama canal is set to open on Sunday at a difficult moment for the international commercial shipping market.
The drop in world oil prices, an economic slowdown in China and other factors have been affecting the canal’s traffic and income.
About a third of the canal’s traffic is between US East Coast ports and northern Asian ports. But that cargo traffic dropped 10.2 per cent in 2015, and lower oil prices have allowed some shippers to use longer routes. And because of the canal’s size limitations, some shippers now go through the Suez Canal.
Canal Administrator Jorge Luis Quijano said Wednesday the shipping market is cyclical and will rebound. There are already 162 reservations for large-ship voyages through the new locks through December, and the new locks are expected to earn between $400 million and $450 million in their first year of operation.
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“Things won’t stay at zero. The world will continue to grow,” Quijano said. “Eventually there will be a rebound and the good thing is that we are prepared to take advantage of that when it occurs.”
Quijano said the current economic downturn may last one or two years.
“We believe that the United States will see significant growth in the future for its new export capacity for natural gas and oil,” Quijano said. “That is what we are betting on, and that is why I feel so optimistic that the canal will do well.”
Canal authorities have been carrying out tests with smaller ships in the lead-up to Sunday’s first full passage, and Quijano acknowledged that one lock didn’t open correctly.
“What happened was that one lock failed to open but it wasn’t a mechanical or electrical problem, but rather a software-control issue,” Quiano said.
The expansion will also allow larger ships to pass, increasing efficiency.
The renovations will double the canal’s capacity, tap new markets such as liquid natural gas shipments and cut global maritime costs by an estimated $8 billion a year.
