There is positive news to report regarding the previous stalemate that could have led to a significant delay in the planned expansion of the Panama Canal.
Reports indicate that the Panama Canal Authority and the consortium of European construction companies who are responsible for the widening have agreed to end their ongoing dispute. A deal was reached Thursday night and calls for independent arbitrators to help determine which party should pay for the incremental construction costs needed to complete the project. According to a published Bloomberg report, the “conceptual” deal, still needs to be signed, with the Canal Authority and construction firms each providing $100 million to enable work to resume at its normal pace. The canal won’t pay the companies’ claims for cost overruns, while it may extend a moratorium for the repayment of advances until 2018, when added canal revenues begin to flow.
As part of the reached agreement, the locks must be completed by December 2015, a year later than the initial completion date, which was originally set to coincide with the waterway’s centennial. However, other news reports quote the head of the canal authority as indicating that the canal widening will not be finished until early 2016, while the construction consortium indicates that completion hinges on the final outcome of arbitrations.
In any case, global shippers and U.S. east coast ports can breathe a little easier this weekend, knowing that they were not facing a potential two or more year delay in the canal widening.
There are a lot of critical global logistics strategies that were riding on the timely widening of the canal, allowing both mega container and bulk cargo carriers to more expeditiously traverse voyages from the Asian ports to the U.S. east coast and Gulf ports. It further provides U.S. east coast port operators a better, albeit a bit more delayed, sense of timing for completing individual port infrastructure upgrade projects to be able to service more mega-ships.