PANAMA CANAL–GLOBAL CONNECTIVITY

In writing this post, “Supply Chain Management Review”, March/April 2012 was used as one resource.

 Before I retired from GE, I supported a manufacturing facility and two distributors in Panama City, Panama.  As a result, I have several trips “under my belt” to this Central American country.  I can say with no hesitation, the people of Panama City were extremely hospitable, friendly and delighted in showing me areas of their country and city.  One of the very noticeable things about Panama City—its hot and very humid-all year. Cooler in winter but steamy hot in the summer.    One “must see” location is the Panama Canal.   My first visit to the Canal absolutely blew me away.  The Canal is a remarkable engineering accomplishment and is now in the process of significant change.   Let’s take a look.

 The Canal was build under conditions of extreme heat, remarkably high humidity and significant issues with malaria and yellow fever.    It was truly a daunting task to design and construct and, as you might expect, took not only years to complete but lives as well.    The need for the Canal becomes obvious when looking at the map of North and South America.

As you can see, from the photograph above, a cargo ships going from the Atlantic to the Pacific, had to traverse Cape Horn at the southern-most tip of South America.    A 13,000 mile trip that ultimately was shortened to 5,200 miles by virtue of cutting across the Isthmus of Panama.   A tremendous saving in time and money.   The location of the canal relative to the Republic of Panama can be seen from the following map. 

In 1899 the US Congress created an Isthmian Canal Commission to examine the possibilities of a Central American canal and to recommend a route. The commission first decided on a route through Nicaragua, but later reversed its decision.   The United States and the new state of Panama signed the Hay-Bunau-Varilla treaty, by which the United States guaranteed the independence of Panama and secured a perpetual lease on a 10-mile strip for the canal. Panama was to be compensated by an initial payment of $10 million and an annuity of $250,000, beginning in 1913. This strip is now known as the Canal Zone.

The length of the Panama Canal is approximately 51 miles. A trip along the canal from its Atlantic entrance would take you through a 7 mile dredged channel in Limón Bay. The canal then proceeds for a distance of 11.5 miles to the Gatun Locks. This series of three locks raise ships 26 meters (85 feet) to Gatun Lake. It continues south through a channel in Gatun Lake for 32 miles to Gamboa, where the Culebra Cut begins. This channel through the cut is 8 miles long and 150 meters (492 feet) wide. At the end of this cut are the locks at Pedro Miguel. The Pedro Miguel locks lower ships 9.4 meters (31 feet) to a lake which then takes you to the Miraflores Locks which lower ships 16 meters (52 feet) to sea level at the canals Pacific terminus in the bay of Panama.  The Panama Canal was constructed in two stages.   The first between 1881 and 1888, being the work carried out by the French company headed by de Lessop and secondly the work by the Americans which eventually completed the canals construction between 1904 and 1914.

The ships for which the canal was designed are now long gone. Modern shipping has increased the size of most ocean-going vessels.   The increase in the tonnage which can be carried has thus caused problems for the canal.  It can only accommodate ships carrying up to 65,000 tons of cargo, but recently ships which are able to carry 300,000 tons have been introduced.

The problem of the ever-increasing size has caused discussion into the construction of a new canal joining the Pacific and Atlantic oceans. There have been discussions on three alternative routes for a new canal, through; Columbia, Mexico and Nicaragua. The Columbian and Mexican routes would allow for the construction of a sea level canal, whereas the Nicaraguan route would require a lock system.

The size of the locks determines the maximum size of a ship that can pass through. Because of the importance of the canal to international trade, many ships are built to the maximum size allowed. These are known as Panamaxvessels. A Panamax cargo ship typically has a DWT of 65,000–80,000 tones, but its actual cargo is restricted to about 52,500 tones because of the 41.2 feet (12.6 m) draft restrictions within the canal. The longest ship ever to transit the canal was the San Juan Prospector (now Marcona Prospector), an ore-bulk-oil carrier that is 973 ft (296.57 m) long with a beam of 106 ft (32.31 m).

Initially the locks at Gatun had been designed to be 28.5 meters (94 ft) wide. In 1908, the United States Navy requested that width be increased to at least 36 meters (118 ft), which would allow the passage of U.S. naval ships. Eventually a compromise was made and the locks were built 33.53 meters (110.0 ft) wide. Each lock is 320 meters (1,050 ft) long, with the walls ranging in thickness from 15 meters (49 ft) at the base to 3 meters (9.8 ft) at the top. The central wall between the parallel locks at Gatun is 18 meters (59 ft) thick and over 24 meters (79 ft) high. The steel lock gates measure an average of 2 meters (6.6 ft) thick, 19.5 meters (64 ft) wide, and 20 meters (66 ft) high.  It is the size of the locks, specifically the Pedro Miguel Locks, along with the height of the Bridge of the Americas at Balboa that determine the Panamax metric and limit the size of ships that may use the canal.

The 2006 third set of locks project will create larger locks, allowing bigger ships to transit through deeper and wider channels. The allowed dimensions of ships will increase by 25% in length, 51% in beam, and 26% in draft, as defined by New Panamax metrics.  This massive project is now underway.

What makes the Panama Canal remarkable is its self sufficiency. The dam at Gatun is able to generate the electricity to run all the motors which operate the canal as well as the locomotives in charge of towing the ships through the canal. No force is required to adjust the water level between the locks except gravity. As the lock operates, the water simply flows into the locks from the lakes or flows out to the sea level channels. The canal also relies on the overabundant rainfall of the area to compensate for the loss of the 52 million gallons of fresh water consumed during each crossing.

Despite the limit in ship size, the canal is still one of the most highly travelled waterways in the world, handling over 12,000 ships per year. The 51-mile crossing takes about nine hours to complete, an immense time saving when compared with rounding the tip of South America.

  In 2014, the Canal will celebrate its centennial.  It will also celebrate the opening of the expanded Panama Canal, according to Alberto Aleman Zubieta, CEO of the Panama Canal Authority.  The new locks, which are currently under construction, will expand the canal’s ability to handle ships nearly three times the size of current ships—an estimated 14,000 containers versus 5,000-container capacity today—and double the throughput capacity.  More importantly, said Aleman, the expanded canal and the logistics capabilities of Panama can serve as the logistics hub of the Americas.   “Panama is the only port with terminals in two oceans.  It’s just 80 kilometers from ocean to ocean and there are more port cranes in Panama than Chile, Mexico and Brazil combined.”

In that sense, the new canal is not so much about capacity, but connectivity.  You can use Panama as a platform to connect the Americas and the Caribbean and the Pacific.   That is important if you want to conquer those markets and expand our supply chain and your procurement capabilities.   These new locks will greatly aid all efforts in promoting that continued connectivity. 

If you are ever in the country of Panama, you must visit the Canal.  As I mentioned previously—it is an engineering marvel.