Panama Canal is booming

Two years ago, the extension work on the Panama Canal was completed. Since then, the LNG (Liquid Natural Gas) giant tankers have been able to use the canal. Ships exporting natural gas and oil products from the USA are the fastest growing business for the Panama Canal, as annual revenue from passage fees has increased more than 20 times in the last two years.

For US energy companies, this means time and cost savings of over 30% on their way to their largest customers, the Asians and a large additional source of income for Panama.

LNG transports through the Panama Canal increased to six million tonnes last year and this year, according to Jorge Quijano, the canal’s manager, this figure is expected to almost double. In 2015 these were still at zero.

“It is a booming business that will continue to grow” said Mr. Quijano, “because Panama now handles about 45% of US LNG exports and 46% of LNG exports. These ships together account for about 10% of the canal revenue.

The fuel cost savings are one of the benefits of using the Panama Canal, which reduces shipping time from Asia to the US East Coast by more than 10 days compared to using the Suez Canal. “They consume less fuel but pay high tolls in Panama,” said Peter Sand, chief analyst at Bimco, a global shipping association. “The total cost may be the same, but the transport time saved is very significant.”

Mr. Quijano expects container traffic via the canal to increase by an average of 5% per year over the next few years. The channel also handles about 30% of US grain exports to Asia.

But he also warns of the danger of trade tariffs between the USA, China and Europe.

“We are just one link in the global supply chain (…)” said Mr Quijano. “I am confident that the US and others will approach world trade in a balanced way. World trade is good for everyone. The duties are not good for anyone.”

The booming Panama Canal is an important part of the economy and promotes the country’s prosperity and growing infrastructure. These are important elements for the attractiveness of the investment location and real estate in Panama.

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