New Panama Canal locks able to handle mega vessels

MINNEAPOLIS, Minn. — The new third set of locks on the Panama Canal will dramatically change grain trade flow, say logistics experts.


“We’re getting very close to being done with the canal. It should be operational by April,” said Scott Sigman, transport and export infrastructure lead with the Illinois Soybean Association.


The locks will be able to accommodate longer, wider and deeper ships, the so-called post-Panamax vessels.


New channels have been built and existing channels have been widened and deepened.


Sigman said the new locks will lure more U.S. grain and oilseed traffic through the Gulf of Mexico.


The gulf typically handles 25 million tonnes of soybeans a year compared to 10 million tonnes through ports in the Pacific Northwest.


The project is also expected to expand the drawing area of the inland waterway system that feeds the Gulf ports.


The current drawing area is 113 kilometres on either side of the Mississippi, Missouri and Ohio rivers, which encompasses 26.7 million acres of soybeans. The reach will expand to 179 km and 37.9 million acres when the canal opens in April.


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Dredging the gulf entrance would expand the drawing area even farther. Silt flowing down the Mississippi River settles where it meets the gulf, which limits the loading depth for ships to 13.72 metres, compared to 15.24 metres in ports in Brazil and Argentina.


“If we had those extra (1.52 metres) we could load another 10,000 to 11,000 tonnes into those ships,” Sigman told the recent Oil-seed & Grain Trade Summit.


That would expand the drawing area for the inland waterway system to 259 km, or 49.6 million acres of soybeans, and include a lot of the shuttle elevators that have been built to ship grain and oilseeds by rail to the Pacific Northwest.


Sigman said the $8.4 billion expansion of the Suez Canal, which opened in August, is a major project that hasn’t received nearly as much attention.


“The Egyptian government wanted to demonstrate that they are on the ball, that it is not a government that is falling apart,” he said.


The expansion included 35 km of new channels and 37 km of existing waterways that were dredged.


Transit time has been cut to 11 hours from 18 hours, and wait time has fallen to three hours from eight to 11 hours.


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Stephen Lofberg, president of the Mid-Ship Group, said the Suez Canal project has already affected container rates with the spread between shipping grain out of Savannah, Georgia, to the Far East versus Los Angeles to the Far East tighter than it has ever been.


Bigger container ships have been built and are being deployed in U.S. ports along the Atlantic Ocean. 


He also anticipates increased container traffic through the ex-panded Panama Canal when it opens in April.


“Nobody in the bulk side of the business is currently really even looking at the Panama Canal be-cause there are lots of unknowns,” said Lofberg.


The canal has been geared toward container ships. Bulk shippers don’t know what the transit times will be or how much they will pay in tolls.


The toll for a Panamax vessel is $175,000, and Lofberg said larger post-Panamax vessels could easily pay two or three times that amount.


Daily ship rental fees and fuel costs are so cheap now that bulk shippers can afford to take the long way around to reach their destinations rather than paying a toll to take the shortcut through the canal.


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