Shipyards urged to tap wider Panama Canal

Source: China Org

Chinese shipyards have been urged to tap an opportunity thrown up by a project to widen the Panama Canal to design new vessels which use the waterway, according to an industry executive.

Work on the US$5.25-billion expansion started in September, and is expected to be completed in August 2014, in time for the centenary of the opening of the world's most famous waterway.

The expansion will create a third set of larger locks of 55 meters wide against 33.5 meters now, and once completed is expected to result in the most cost-effective way to move freight in and out of the United States Midwest.

Shipyards in China, which is the largest exporter of sea-borne goods to the United States and a rising shipbuilding power, should quickly take advantage of this new opportunity, said David Tozer, business manager for container ships at Lloyd's Register, a global ship classification society.

A study by Lloyd's Register and Ocean Shipping Consultants has identified potential designs for "New Panamax" container ships with load capacities of at least 12,500 twenty-foot equivalent units but still capable of sailing through the canal, post 2014.

"Any owner who has an NPX ship in 2014 will make a lot of money. They will be ahead of the market," Tozer told Shanghai Daily in a recent interview. "To order an NPX vessel for delivery in 2014, you need to consider the design now. This is a real opportunity for China's yards."

The cost of moving goods in an NPX-sized vessel will be about eight percent higher than by ultra-large container ships with capacities of up to 14,000 TEU, Tozer said. But ULCS will not be able to pass through the expanded waterway.

"The Chinese ship designers need to be considering NPX design standards (now)," he said. "They should be speaking to ship owners and the Panama Canal Authority about the possibility of (building and designing) bigger ships."

Global orders

More than 190 ships, each with a capacity of more than 10,000 TEUs, are now on the global order books, half of which have been ordered since May, Tozer said. Only a few of these vessels will not be able to transit via the widened canal, and most will be built by South Korean shipbuilders.

The Panama Canal expansion is expected to greatly change the pattern of sea-borne world trade, maritime experts said.

An official at the China Classification Society, which plans to set up a representative office in Panama next year, said Chinese shipyards have started looking at various factors in designing vessels that can sail through the widened Panama Canal.

The society provides services related to classification, safety, quality and risk management for the global shipbuilding industry.

Lloyd's Register has won contracts with Chinese yards to classify new vessels with a total capacity of 8.5 million gross tons in the first 10 months of this year, a sharp jump from 1.6 million gross tons for the whole of 2006, a Hong Kong-based spokesman said.

An expanded canal could also be positive to China, the waterway's second biggest user, industry experts pointed out. For example, it would enhance the nation's energy security. A wider waterway will help reduce freight costs for the country to ship crude oil from South American countries such as Venezuela, which has agreed to increase oil supply to China.

It would take only 24 days to transport crude from Venezuela to China using the Panama Canal against the 45 days sailing the Atlantic Ocean-Indian Ocean route now, industry officials say.

The 80-kilometer-long canal, connecting the Atlantic Ocean and the Pacific Ocean, was built by the United States which handed it over to Panama in 1999. The canal handles around five percent of the world's trade. Around two-thirds of the cargo that passed through the canal is headed to or from the US.