Introduction to the Panama Canal

The Panama Canal is a major ship canal that traverses the Isthmus of Panama in Central America, connecting the Atlantic and Pacific Oceans. Construction of the Canal was one of the largest and most difficult engineering projects ever undertaken. It has had an enormous impact on shipping between the Pacific and Atlantic, obviating the long and treacherous route via the Drake Passage and Cape Horn at the southernmost tip of South America. A ship sailing from New York to San Francisco, via the Canal, travels 9,500 km (6,000 miles), well under half the 22,500 km (14,000 mile) route around Cape Horn. Although the concept of a canal near Panama dates back to the early 16th Century, the first attempt to construct a canal began in 1880 under French leadership. After this attempt failed and saw 22,000 workers die, the project of building a canal was attempted and completed by the U.S. in Panama in the early 1900s, with the Canal opening in 1914. The building of the 77 km (48 mile) Canal was plagued by problems, including disease (particularly malaria and yellow fever) and landslides. By the time the Canal was completed, a total of 27,500 workers were estimated to have died in the French and U.S. attempts.

Since opening, the Canal has been enormously successful, and continues to be a key conduit for international shipping. Each year more than 14,000 ships pass through the Canal, carrying more than 205 million tons of cargo.

The Canal can accommodate vessels from small private yachts up to fairly large commercial ships. The maximum size of vessel that can use the Canal is known as Panamax ; an increasing number of modern ships exceed this limit, and are known as post-Panamax vessels. A typical passage through the Canal by a cargo ship takes around 9 hours.

The Canal’s present geography

The Canal consists of seventeen artificial lakes, several improved and artificial channels, and two sets of locks. An additional artificial lake, Alajuela Lake, acts as a reservoir for the Canal.

From the buoyed entrance channel in the Gulf of Panama (Pacific side), ships travel 13.2 km (8.2 miles) up the channel to the Miraflores locks, passing under the Bridge of the Americas. The two-stage Miraflores lock system, including the approach wall, is 1.7 km (1.1 miles) long, with a total lift of 16.5 meters (54 ft) at mid-tide. The artificial Miraflores Lake is the next stage, 1.7 km (1.0 mile) long, and 16.5 metres (54 ft) above sea level. The single-stage Pedro Miguel lock, which is 1.4 km (0.8 miles) long, is the last part of the ascent with a lift of 9.5 meters (31 ft) up to the main level of the Canal.

The Gaillard (Culebra ) Cut slices 12.6 km (7.8 miles) through the continental divide at an altitude of 26 metres (85 ft), and passes under the Centennial Bridge. The Chagres River (Río Chagres ), a natural waterway enhanced by the damming of Lake Gatún, runs West about 8.5 km (5.3 miles), merging into Lake Gatún. Gatún Lake, an artificial lake formed by the building of the Gatún Dam, carries vessels 24.2 km (15.0 miles) across the Isthmus. The Gatún locks, a three-stage flight of locks 1.9 km (1.2 miles) long, drop ships back down to sea level.

A 3.2 km (2.0 mile) channel forms the approach to the locks from the Atlantic side. Limón Bay (Bahía Limón ), a huge natural harbour, provides an anchorage for some ships awaiting transit, and runs 8.7 km (5.4 miles) to the outer breakwater. Thus, the total length of the Canal is 77.1 km (47.9 miles).

The Canal’s efficiency and maintenance

Increasing volumes of imports from Asia which previously landed in the U.S. West coast ports are now travelling through the Canal to the East coast. The total number of vessel transits in fiscal year 1999 was 14,336; this fell to a low of 13,154 in 2003, due, at least in part, to global economic factors, but rose to 14,194 in 2006. (The Canal’s fiscal year runs from October to September). However, this has been coupled with a steady rise in average ship size and in the numbers of Panamax vessels transiting, so that the total tonnage carried rose steadily from 227.9 million PC/UMS tons in fiscal year 1999 to 296.0 million tons in 2006. Given the negative impact of vessel size on the rate of transits (for example, the inability of large vessels to cross in the Gaillard Cut), this represents significant overall growth in Canal capacity, despite the reduction in total transits. The Canal set a traffic record on 13 March 2006, when 1,070,023 PC/UMS tons transited the waterway, beating the previous record of 1,005,551 PC/UMS tons set on 16 March 2004.

The Canal administration has invested nearly US$ 1 billion in widening and modernizing the Canal, with the aim of increasing capacity by 20%. The Canal authority cites a number of major improvements, including the widening and straightening of the Gaillard Cut to reduce restrictions on crossing vessels, the deepening of the navigational channel in Gatún Lake to reduce draft restrictions and improve water supply, and the deepening of the Atlantic and Pacific Entrances of the Canal. This is supported by new vessels, such as a new drill barge and suction dredger, and an increase of the tugboat fleet by 20%. In addition, improvements have been made to the Canal’s operating machinery, including an increased and improved tug locomotive fleet, the replacement of more than 16 km of locomotive track, and new lock machinery controls. Improvements have been made to the traffic management system to allow more efficient control over ships in the Canal.

The Canal’s global competition

Despite having enjoyed a privileged position for many years, the Canal is increasingly facing competition from other quarters. Although remote, speculation continues over a possible new canal through Mexico, Colombia or Nicaragua that will be capable of accommodating post- Panamax vessels, and two private proposals for a railway linking ports on the two coasts.

Critics have also voiced their concerns over the planned increase in Canal tolls, suggesting that the Suez Canal may become a viable alternative for cargo en route from Asia to the U.S. East Coast. Nevertheless, demand for the Panama Canal continues to rise.

The increasing rate of melting of ice in the Arctic Ocean has led to speculation that the Northwest Passage may become viable for commercial shipping at some point in the future. This route would save 9,300 km (5,800 miles) on the route from Asia to Europe compared with the Panama Canal, possibly leading to a diversion of some traffic to that route. However, such a route would still hold significant problems due to ice, at some times of year, as well as unresolved territorial issues.

The Canal’s future

With demand rising, the Canal is positioned to be a significant feature of world shipping for the foreseeable future. However, changes in shipping patterns – particularly the increasing numbers of post-Panamax ships – have necessitated the recently agreed changes to the Canal so that it may retain a significant market share. It was recently anticipated that, by 2011, 37% of the world’s container ships would have been too large for the present Canal, and hence a failure to have expanded would have resulted in a significant loss of market share. The maximum sustainable capacity of the present Canal, given some relatively minor improvement work, was estimated at between 330 and 340 million PC/UMS tons per year; it was anticipated that this capacity would have been reached between 2009 and 2012. Close to 50% of transiting vessels are already using the full width of the Canal’s locks.

An enlargement scheme similar to the 1939 Third Lock Scheme, to allow for a greater number of transits and the Canal’s ability to handle larger ships, has therefore been under consideration for some time. This enlargement scheme was approved by the Panamanian Government and, subsequently, this proposal to expand the Canal was finally approved in a national referendum (by 76.8%) on 22 October 2006.

The Canal’s expansion project

The current plan is for two new flights of locks: one to the East of the existing Gatún locks, and one Southwest of Miraflores locks, each supported by approach channels. Each flight will ascend from ocean level direct to the Gatún Lake level; the existing two-stage ascent at Miraflores / Pedro Miguel will not be replicated. The new lock chambers will feature sliding gates, doubled for safety, and will be 427 meters (1,400 ft) long, 55 meters (180 ft) wide, and 18.3 meters (60 ft) deep; this will allow for the transit of vessels with a beam of up to 49 meters (160 ft), an overall length of up to 366 meters (1,200 ft) and a draft of up to 15 meters (50 ft), equivalent to a container ship carrying around 12,000 20-foot (6.1 m) long containers (TEU).

The new locks will be supported by new approach channels, including a 6.2 km (3.8 mile) channel at Miraflores from the locks to the Gaillard Cut, skirting around Miraflores Lake. Each of these channels will be 218 meters (715 ft) wide, which will require post-Panamax vessels to navigate the channels in one direction at a time. The Gaillard Cut and the channel through Gatún Lake will be widened to no less than 280 meters (918 ft) on the straight portions and no less than 366 meters (1,200 ft) on the bends. The maximum level of Gatún Lake will be raised from reference height 26.7 meters (87.5 ft) to 27.1 meters (89 ft).

The water storage basins adjacent to each lock chamber are staged in height to allow each of them in turn to be filled by gravity as the lock chamber drains.

Each flight of locks will be accompanied by nine water re-utilisation basins (three per lock chamber), each basin being approximately 70 meters (230 ft) wide, 430 meters (1410 ft) long and 5.50 meters (18 ft) deep. These gravity-fed basins will allow 60% of the water used in each transit to be re-used; the new locks will consequently use 7% less water per transit than each of the existing lock lanes. The deepening of Gatún Lake, and the raising of its maximum water level, will also provide significant extra water storage capacity. These measures are intended to allow the expanded Canal to operate without the construction of new reservoirs.

The estimated cost of the project is US$ 5.25 billion. The project is designed to allow for an anticipated growth in traffic from 280 million PC/UMS tons in 2005 to nearly 510 million PC/UMS tons in 2025; the expanded Canal will have a maximum sustainable capacity of approximately 600 million PC/UMS tons per year. Tolls will continue to be calculated based on vessel tonnage, and will not depend on the locks used.

The new locks are expected to open for traffic in 2015. The present locks, which will be 100 years old by that time, will then have greater access for maintenance, and are projected to continue operating indefinitely. On 3 September 2007, work commenced on the expansion of the Canal, with thousands of Panamanians at Paraiso, Panama City, witnessing a huge explosion bite into a hill. However, the event was sadly marred by the death of a worker, killed when his truck hit an electric pylon. The first phase of the project will be dry excavations of the 218 meter (715 ft) wide trench connecting the Culebra Cut with the Pacific coast, removing 47 million cubic meters of earth and rock.

The Canal’s cargo volume

Based on ACP’s projections, during the next 18 years, cargo volume transiting the Canal will grow at an average of 3% per year, doubling for example 2005’s tonnage by the year 2025. As such, providing the Canal with the capacity to transit larger vessels will make it more efficient by allowing the transit of higher cargo volumes with relatively fewer transits and less water use.

Historically, the dry and liquid bulk sectors have generated most of the Canal’s revenues. Recently, however, the containerized cargo sector has replaced the dry bulk sector as the Canal’s main income generator, moving the dry bulk sector into second place. On the other hand, the vehicle carriers’ sector has become the third income generator, replacing the liquid bulk sector. Shipping industry analyses conducted by the ACP and top industry experts indicated that it would be beneficial to both the Canal and its users to expand the Canal due to the demand that would (and now will) be served by allowing the transit of more tonnage.

The question is, however, whether the trend upon which the ACP made those projections can continue for a generation. The growth in Panama Canal usage over the past few years has been almost entirely driven by increased U.S. imports from China passing through the Canal to ports on the U.S. East and Gulf Coasts. But it is increasingly recognized in both the U.S. and China that this imbalance in trade is unsustainable and will be reduced by some sort of adjustment in the coming years, though it is important to note that any such imbalance need not be made up by physically-shipped goods, but could be made by other trade such as intellectual property as China upgrades its intellectual property protection laws. The ACP, however, has presumed that it will not only not be adjusted, but will continue to grow for a generation as it has for the past several years. One of the central points of the Canal expansion proposal’s critics, most prominently made by former Canal administrator Fernando Manfredo, was that it was unrealistic to attempt to predict Canal usage trends over a generation, most improbable to expect that U.S. imports from China would continue to grow as they have the past few years over a generation, and irresponsible to bet Panama’s financial future on such a projection.