The $5.4 billion HOV lane: Will Panama Canal expansion boost global trade?

It took 40,000 workers nearly 10 years to dig the new access lane to the Panama Canal, a massive engineering feat that rivals the canal’s initial opening 102 years ago and that could potentially reshape the way goods move around the globe.

When the $5.4 billion expansion project opens Sunday, it will nearly triple the capacity of the original canal, allowing ships carrying up to 14,000 containers a quicker path between Asia and the USA.

Anticipation of the new high-capacity lane sparked a global investment trend that dwarfed the canal expansion price tag as ports from Rotterdam to New York to Brazil prepared to welcome the megaships. But its opening comes amid a global shipping industry slump, raising questions about whether these enormous investments will pay off.

The Port Authority of New York and New Jersey has spent $6 billion over the past decade to deepen its harbor and complete other projects to prepare for the bigger ships, said Beth Rooney, an assistant director with the port.

“As the largest ships come, our ability to compete increases,” Rooney said. “It will be very dynamic and very interesting to watch.”

Opening in 1914, the Panama Canal was a marvel of engineering and dark history. Cholera, malaria and yellow fever claimed the lives of more than 22,000 workers who labored to dig the 50-mile canal through the jungles of the Isthmus of Panama. It took 44 years to complete, but it transformed global trade by creating a shortcut between the Atlantic and Pacific Oceans.

As ships grew in size, the canal faced mounting pressure to expand. The current canal can accommodate ships carrying up to 5,000 containers.

The expansion project, started in 2007, required a third set of locks to raise and lower ships between the varying heights of the Pacific and Atlantic oceans, said Ilya de Marotta, lead manager of the expansion project for the Panama Canal Authority. The locks use about 50 million gallons of water — the average daily consumption of the city of New Orleans — to move each ship through.

The new lane will allow ships carrying nearly three times as many containers to pass, bringing more umbrellas, ceiling fans, flat-screen TVs and myriad other goods from factories in China and other parts of Asia to commercial centers on the East Coast. About 90% of the world’s goods travel by sea.

New products — such as natural gas, which is commonly ferried on bigger ships — can  travel more quickly from U.S. ports to Asia or western stretches of South America, de Marotta  said.

“We’re opening up new markets that were never even considered before,” she said.

The expansion comes amid a shipping industry slowdown linked to China’s faltering economy and sagging global demand.

Though bigger ships will fit through the canal, it doesn’t mean they’ll be filled with more goods, said Greg Miller, a senior editor at IHS  Fairplay, a publication run by global consultants IHS.

U.S. demand still dictates the amount of tennis shoes and microwaves that arrive here.

“The fact that the ships are getting bigger doesn’t necessarily mean there is going to be more cargo on them,” he said. “It could be the same cargo on a different ship.”

Though ports in New York, Miami and Long Beach have invested in their own expansion projects to draw the bigger ships, doubts linger on whether the United States can export goods, such as wheat and other commodities, on the larger ships to take advantage of the expanded canal, said Nick Pansic of MWH Global, which worked on the expansion project. Most ships carrying U.S. agricultural products leave from ports along the Gulf Coast, some of which have aging infrastructure and may be unable to accommodate the bigger ships, he said.

“It’s not just a matter of importing more stuff to meet our demand, but there’s a real opportunity for the export of agricultural products more efficiently to Asia,” Pansic said. “That’s a big question mark.”

Global shipping concerns haven’t stopped Port Miami officials from embarking on $1.3 billion worth of improvements to their port, including deepening the main harbor to 50 feet and improving 12 miles of railway connecting the port to the mainland. The goal: draw more 14,000-container ships to their port directly from Asia and re-establish Miami as a major U.S. shipping hub.

“We are now in a position to be a very, very serious player on the East Coast,” port director Juan Kuryla said.

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Panama Canal Authority officials are so optimistic the global shipping slump will end, they are thinking about how the canal will host even larger ships. New ships coming off the assembly line can hold up to 20,000 containers.

Such ships account for only a fraction of overall shipping routes, so there is no immediate need for a fourth set of locks, but, de Marotta said, just in case, planners set aside some land for a future fourth lane.

“We’re already analyzing it,” she said.