News / Nicaraguan project tough to build and is no threat to us, says Panama Canal chief

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The chief executive of the Panama Canal has dismissed the threat of competition from a Nicaraguan canal, saying his organisation was chiefly focused on winning back cargo “lost to Suez”.

In a question and answer session at the recent TPM conference in Long Beach, Jorge Quijano told delegates the sheer of volume of work needed to make the Nicaraguan canal a reality represented a considerable challenge.

“We have estimated that it would be very hard to do in five years – if you look at the amount of work the Panama Canal has had since it began life in 1880, there has been 549cu metres of excavation over this period.

“The Nicaraguan project is going to be 10 times that and it will have to be done in five years.

“I’m not saying it can’t be built, but within that time frame it is very challenging,” he said, adding that the economics of the project also remained unclear.

“He [HKND chief executive Wang Jing] says it is a private investment, but he won’t tell us who the investors are. Nicaragua is going to have share the market with the Panama Canal, and so, from private investment standpoint, we don’t see it generating a reasonable return.

“But if it is a different concept, such as a country putting up the money, then that’s a different story.

Mr Quijano also defended the dimensions of the newly expanded Panama Canal, which appear outpaced by advances in vessel design before it opens.

“All of the modifications over the last 20 years have been focused on attending the projected demand and how those volumes are processed. When we were looking at our expansion, there is a point of diminishing returns, and at that time being able to handle 12,000-13,000teu vessels made sense for us.

“Certainly, 18,000 teu vessels will continue to be built, but that does not means that other ships are not also being built. And we expect that once we and our pilots have experience with the 9,000-10,000teu ships then we will move onto the 13,000teu vessels.”

The expansion is set to be opened on 1 April 2016 –the new Atlantic locks will start being flooded in the middle of this year and the Pacific locks flooded towards year-end. After that, the testing process begins, with the water flows and the lock seals being checked.

“Towards the end of the year and the beginning of 2016, we will start testing with post-panamax vessels going into the locks for our pilots to become acquainted with the process,” he said.

Mr Quijano also reiterated a previous promise to box shipping lines that toll discounts will be credited to those putting more than a certain number of containers across the waterway.

“The lowest threshold is 450,000teu – a line would get discounted tolls once over that,” he said.

However, the recent reorganisation of the shipping industry into four major deepsea east-west alliances has complicated the matter, as the discounts would apply to the line which owns or operates the particular vessel transiting the canal.

“If you have an alliance with a nine-vessel string, a line with two vessels on that string will get less of a discount than one with three vessels, no matter whose containers are on the vessels.”