According to the Wall Street Journal, the giant Panama Canal expansion opens June 26 amid much fanfare and one of the worst shipping industry slumps ever. While it won’t do anything to help the dire state of the industry near-term, the changes are critical to Western trade in the long run.
The canal, which handles about a third of Asia-to-Americas trade, had no choice but to expand. As the industry copes with its downturn, major shipping companies are pooling their resources and using fewer but much bigger ships—ones that are too large to fit through the pre-expansion Panama Canal
The Panama Canal’s New Expansion, Explained
The Panama Canal can now accommodate vessels that are longer, wider and heavier than before, thanks to an expansion that was nine years in the making. The face-lift was crucial to compete in a world where ships are getting bigger and bigger. Photo/Illustration: Heather Seidel for The Wall Street Journal
The nine-year, $5.4 billion expansion more than doubles the canal’s cargo capacity. A third lane has been added to the canal that accommodates ships large enough to carry up to 14,000 containers, compared with around 5,000 currently. This alleviates a cargo bottleneck caused by the smaller ships that was due to get worse over time.
The expansion makes the Panama Canal more competitive with the Suez Canal in Egypt, shortening the one-way journey by sea from Asia to the U.S. East Coast by roughly five days and eliminating the need for a trip around Cape Horn to get to the Atlantic.
