Panama Canal expansion project

2007 16 construction of larger locks on Panama Canal

The Panama Canal expansion project (lang es), also called the Third Set of Locks Project, doubled the capacity of the Panama Canal by adding a new traffic lane, enabling more ships to transit the waterway, and increasing the width and depth of the lanes and locks, allowing larger ships to pass. The new ships, called New Panamax, are about one and a half times the previous Panamax size and can carry over twice as much cargo. The expanded canal began commercial operation on 26 June 2016. The project has:
Built two new sets of locks, one each on the Atlantic and Pacific sides, and excavated new channels to the new locks
Widened and deepened existing channels
Raised the maximum operating water level of Gatun Lake

Then Panamanian President Martín Torrijos formally proposed the project on 24 April 2006, saying it would transform Panama into a First World country. A national referendum approved the proposal by a 76.8 percent majority on 22 October the same year, and the Cabinet and National Assembly followed suit. The project formally began in 2007. It was initially announced that the Canal expansion would be completed by August 2014 to coincide with the 100th anniversary of the opening of the Panama Canal, but various setbacks, including strikes and disputes with the construction consortium over cost overruns, pushed the completion date back several times. Following additional difficulties including seepage from the new locks, the expansion was opened on 26 June 2016. The expansion doubled the Canal’s capacity. On March 2, 2018, the Panama Canal Authority announced that 3,000 New Panamax ships had crossed the canal expansion during its first 20 months of operation.

The original Panama Canal had limited capacity determined by operational times and cycles of the existing locks and was further constrained by the current trend towards larger (close to Panamax sized) vessels transiting the canal, requiring more transit time in the locks and channels. Also, periodic maintenance on the aging canal required shutdowns of the waterway. Demand was growing due to the growth of international trade, and many users required a guaranteed level of service. Despite the gains which have been made in efficiency, the Panama Canal Authority (ACP) estimated that the canal would reach its maximum sustainable capacity between 2009 and 2012. All of the canal widening studies since the 1930s determined that the best way to increase canal capacity was by building a third set of locks larger than the 1914 locks. The US began excavations for new locks in 1939, but abandoned them in 1942 because of the outbreak of World War II. While the canal expansion was being completed, and considering the high operational costs of the vessels, the long queues that occur during the high season December through March (sometimes up to a seven day delay), and the high value of some of the cargo transported through the canal, the ACP implemented a Transit Booking System and Transit Slot Auction to allow a better management of the scarce capacity available and to increase the level of service offered to the shipping companies. The scheme gives users two choices: (1) transit by order of arrival on a first come, first served basis, as the canal historically has operated; or (2) booked service for a fee—a congestion charge. The booked service allows two options of fees. The Transit Booking System, available online, allowing customers who do not want to wait in queue to pay an additional 15% over the regular tolls, guaranteeing a specific day for transit and crossing the canal in 18 hours or less. ACP sells 24 of these daily slots up to 365 days in advance. Since 2006, ACP has made available a 25th slot, sold through the Transit Slot Auction to the highest bidder. The second choice is high priority transit. The main customers of the Transit Booking System are cruise ships, container ships, vehicle carriers, and non containerized cargo vessels.

The Panama Canal Authority predicts that the volume of cargo transiting the canal will grow by an average of 3% per year, doubling the 2005 tonnage by 2025. Allowing larger vessels to transit the canal will move more cargo per transit and volume of water used. Historically, the dry and liquid bulk segments have generated most of the canal's revenues. Bulk cargo includes dry goods, such as grains (corn, soy, and wheat, among others), minerals, fertilizers, coal, and liquid goods, such as chemical products, propane gas, crude oil, and oil derivatives. Recently, containerized cargo has replaced dry bulk as the canal's main income generator, moving it to second place. Vehicle carriers have become the third largest income generator, replacing the liquid bulk segment. Shipping industry analyses conducted by the ACP and top industry experts indicate that the canal expansion will be beneficial to both the canal and its users because of the demand that will be served by allowing the transit of more tonnage. (although such an 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, presumes that trade will continue to grow for a generation as it has for the past several years. One of the central points made by critics of canal expansion, most prominently former canal administrator Fernando Manfredo, is that it is unrealistic to attempt to predict canal usage trends over a generation, improbable to expect that US imports from China will continue to grow for a generation as they have the past few years, and irresponsible to bet Panama's financial future on such a projection.

The most direct competition to the canal comes from alternative routes that present options for transporting cargo between the same points of origin and destination. The opening of the Russian Northern Sea Route and the Canadian Northwest Passage to commercial traffic could pose an alternative to the canal in the long term. Warmer waters in the Arctic Ocean could open the passage for an increasing number of months each year, making it more attractive as a major shipping route. However, the passage through the Arctic would require significant investment in escort vessels and staging ports. The Canadian commercial marine transport industry does not anticipate that this route will be a viable alternative to the Panama Canal within the next 10 to 20 years. The two main current competitors of the Panama Canal are the US intermodal system and the Suez Canal. The main ports and merchandise distribution centers in these routes are investing in capacity, location, and maritime and land infrastructure to serve post Panamax container ships and their larger cargo volumes. According to the ACP, the growing usage of such ships in transcontinental routes competing with the canal is irreversible. It was estimated that by 2011 approximately 37% of the capacity of the world's container ship fleet would consist of vessels that did not fit through the canal, as it existed prior to 2016, and a great part of this fleet could be used on routes that compete with Panama. Although the canal was nearing its maximum capacity, it did not mean that ships were unable to transit it. Rather, the canal's growth capacity stagnated and that it could not capture additional cargo volumes.

The original canal has two lanes, each with its own set of locks. The expansion project added a third lane through the construction of lock complexes at each end of the canal. One lock complex is located on the Pacific side, southwest of the existing Miraflores Locks. The other is located east of the existing Gatun Locks. Each of these new lock complexes have three consecutive chambers designed to move vessels from sea level to the level of Gatun Lake and back down again. The operation of both the old and new locks uses gravity and valves. There is no pumping involved. Operation of the locks, old and new, uses water from Gatun Lake. Even in the original situation with two lock lanes, water supply can be limited at the end of Panama's dry season, when the lake's water level is low. The addition of a third set of locks meant that this water supply issue needed to be addressed. For the new locks, three basins are associated with each lock chamber. The volume lost per cycle is two fifths of the "moving water" chamber volume. The other three fifths is reused. An equal savings of water, based on the same principle, could be reached by adding more lock chambers. Constructing a stair of eight chambers (instead of three) to elevate would use an water slice per cycle. However, this would require ships to travel through eight locks, making ship handling less efficient. Water usage is calculated per single lock cycle. It is determined by the water volume in a lock chamber between the levels it handles. Essentially, each cycle uses the volume of water discharged by the lock chamber (its width multiplied by its height and depth). When the locks are in stairs, as in the Panama Canal, only the first (highest) lock chamber matters for this calculation. None of the lower locks use additional water; they have the same volume. Moreover, the ship's underwater volume does not matter, because that volume is present both before and after the change in water level and thus is part of the non moved volume. The water used per lock operating cycle is therefore equal to the amount of water that flows into the first (upper) lock chamber when filling it from Gatun Lake. Reducing this volume requires reducing the chamber's width, length, or elevating height. Note that the elevating height has already been reduced by staging the total elevation change into three locks. Were this change done in a single lock chamber, the water volume lost would be three times as much. The water saving basins function as follows: The volume of water moved by the lock chamber (e. g., a height of ) can be divided into five equal horizontal "slices" (here, 1.8 m each). When the canal begins operation, the chamber is filled once from Gatun Lake. Then, when emptying the chamber, the top three slices (1, 2, and 3) are emptied, one by one, into three basins, each at a successively lower elevation. That is, water slice 1 is emptied, using gravity and valves, into a basin that is at the same level as water slice 2. Then water slice 2 is emptied into a basin at the same level as water slice 3, and slice 3 is emptied into a basin at the same level as slice 4. Water slices 4 and 5 are emptied into the next lock chamber and "lost" (as in the original canal locks). When the lock moves a ship upward, the chamber is closed, and the water from the basin at level 4 is let into the chamber, filling slice 5. Then basin level 3 fills level 4, and basin 2 fills level 3. Next, from levels 2 and 1 are filled from Gatun Lake, "costing" a volume of instead of over the chamber area (2/5 of the elevation height). The ship is now at the level of Gatun Lake and can cross it.

The main purpose of the canal expansion program is to increase Panama's ability to benefit from the growing traffic demand. This growing demand is manifested in both the increased cargo volumes and the size of vessels that will use the Panama route. In this sense, with a third set of locks, the canal will be able to manage the traffic demand forecast beyond 2025; total inflation adjusted revenues for that year are predicted to amount to over USD $6.2 billion. Independent engineers, most notably Humberto Reynolds and Tomás Drohan Ruiz, the former head of engineering and dredging of the Panama Canal, said that the project would cost much more than budgeted and that it was too risky for Panama. M. A. Bernal, a professor at the University of Panama, argued that confidence in the ACP's budget is undermined because of the involvement of engineering and consultancy firm Parsons Brinckerhoff.

According to the ACP, the third set of locks would be financially profitable, producing a 12 percent internal rate of return. The project's financing is separate from the governmental budget. The state, which has a lower credit rating than the ACP, does not guarantee or endorse any loans borrowed by the ACP for the project. Assuming that tolls increase at an annual average rate of 3.5 percent for 20 years, and according to the traffic demand forecast and construction schedule deemed most likely by the ACP, the external financing required would be temporary and in the order of US$2.3 billion to cover peak construction activities between 2009 and 2011. With the cash flow generated by the expanded canal, investment costs are expected to be recovered in less than 10 years, and financing could be repaid in approximately eight.

The ACP's proposal claims that the project will not permanently harm the environment, communities, primary forests, national parks or forest reserves, relevant patrimonial or archaeological sites, agricultural or industrial production areas, or tourist or port areas. It says that any harm can be mitigated using existing procedures and technology. (editor of the online Panama News), Gonzalo Menendez (former head of Panama's National Environmental Authority), and Ariel Rodriguez (a biologist at the University of Panama), and former Vice Minister of Public Works Grettel Villalaz de Allen. Jackson contends that the ACP's public statements often do not match the findings of their studies. He argues that studies by Delft Hydraulics, WPSI Inc., and DHI say that the proposed water saving basins will allow more salt water into Gatun Lake, from which about half of Panama's population takes its drinking water. The ACP says that the problem can be reduced by "flushing" the new locks with fresh water from Gatun Lake, but this would defeat the water saving feature. However, one of the leading environmental organizations in Panama, the National Association for Nature Conservation (ANCON), says that the studies and projections of operations of the third set of locks, including the water saving basins, credibly state that there will be very low levels of salinization of waters of Gatun Lake and that these levels will preserve the biological separation of the oceans while safekeeping biodiversity and water quality for human use.

According to the ACP, the canal expansion's impact on employment was first to be observed in jobs directly generated by its construction. Approximately 35,000–40,000 new jobs were created during the construction of the third set of locks, including 6,500–7,000 additional jobs that were directly related to the project during the peak years of construction. However, officials state that the most important impacts on employment will be medium and long term, and will come from the economic growth brought about by extra income generated by the expanded canal and the economic activities produced by the increase in canal cargo and vessel transits. The labor required for construction of the third set of locks was largely done by Panamanians. To ensure the availability of Panamanian labor necessary for the third set of locks project and its connected activities, the ACP and public and private authorities worked jointly to train the required workforce, with sufficient lead time, so that it had the necessary competencies, capabilities, and certifications. The costs of these training programs were included in the cost estimates of the project.

Former President Jorge Illueca, former sub administrator of the Panama Canal Commission Fernando Manfredo, shipping consultant Julio Manduley, and industrial entrepreneur George Richa M. said that the expansion was not necessary; they claimed that the construction of a mega port on the Pacific side would be sufficient to meet probable future demand. Such a port would be the second in the American Pacific deep enough to handle post Panamax ships, the first being Los Angeles. As Panama is already a natural trading route, it would be able to handle the movement of containers from the Pacific to the Atlantic side via railroad, where containers would be reloaded to other ships for worldwide distribution. In addition, the following organizations and people oppose the project:
The Council on Hemispheric Affairs (COHA) stated in a press release that under the Torrijos government, the expanding Panama Canal would not likely serve the needs of the vast majority of Panamanians. Many of the benefits would be tied to the commercial interests of the country's accountants, bankers, and lawyers, as well as their US counterparts, and world trade. They also said that the administration's rampant corruption and other flaws raised questions about Panama's capacity to supervise such an enormous project. COHA has received some letters pointing out factual errors in its statement, and plans to modify its statement in response. Former President Guillermo Endara and his Vanguardia Moral de la Patria Party, MOLIRENA, a conservative, business oriented party that normally gets about 10 percent of the vote. Most of the Panamanian left and most of the labor movement, including CONUSI (National Independent Syndicate Union) and FRENADESO (the National Front for the Defence of Social and Economic Rights). Most members of the nationalist Panameñista Party (Grettel Villalaz de Allen and Gonzalo Menendez, mentioned above, and former legislator Gloria Young are prominent examples).