The Panama Canal, following a widely reported payments dispute with contractors that threatens to delay its expansion, went on the counteroffensive this week with a new website designed to provide “Clarification of the most common doubts about the Expansion.”
The website is dedicated to the expansion project and includes a section titled “10 Myths of the Expansion” in which it counters a range of topics, such as ideas that the canal expansion will never be completed, that the canal is in breach of the contract and that it is not paying contractors on time.
Pointedly, it does not address the question whether completion of the project will be further delayed beyond the latest estimate of the latter half of 2015. The project was originally scheduled for completion on Oct. 21, 2014, on the 100th anniversary of the opening to the original canal locks in 1914. But the inability of the consortium of European contractors that is building a third set of locks to manufacture cement for the locks that would last another 100 years delayed the completion date until the second quarter of 2015. After that first delay, what were described as electromechanical problems with the locks delayed their opening until the end of 2015.
However, the website does address a number of issues raised as part of its very high profile dispute with the consortium that would allow container ships of more than 12,000 TEUs to transit the canal, versus a maximum of roughly 5,500-TEU ships that can transit the canal today. The contracting consortium, Grupo Unidos por el Canal, has threatened to stop working on the locks on Jan. 19 if it did not receive payment for what it claims are $1.6 billion cost overruns. The canal authority has rejected that claim but has offered other proposals to settle the dispute. The consortium is led by engineering firm Sacyr Vallehermoso of Spain, also comprises Impregilo of Italy, Jan De Nul of Luxembourg and Construction Urbana of Panama.
One of the claims the canal disputes on the website is that the dispute with the construction consortium “confirms the Canal should not have been expanded.” According to the website, the dispute solely centers around the contract and “does not have anything to do with the reasons that supported the proposal for the Panama Canal Expansion,” which “now more than ever has been confirmed to be needed. For example, shippers are already building ships with the dimensions of the new Panama Canal locks and ports in various countries are adapting to receive these vessels that use the Panama route.”
It alludes to the Panama Canal’s loss of market share to the Suez Canal as carriers in recent years have deployed available post-Panamax container ships in the Suez route between Asia and North America: “The need for the Expansion has become crucial, since the Canal has recently lost certain services that used this route since the bigger vessels cannot pass through the existing locks.”
In JOC’s 2014 Annual Review & Outlook, administrator and CEO Jorge L. Quintano conceded that the Panama Canal’s tonnage fell slightly in fiscal year 2013, which he attributed to “continuing weak demand in the United States and Europe and the general slowdown of emerging market economies” and carriers’ shifts to larger vessels that exceed the canal’s current capacity.
The canal authority may also be feeling pressure because stories regarding a possible Nicaragua canal just won’t go away.
In response to the idea that the expansion “is in danger of not being complete,” the canal says, “The Panama Canal Expansion Program is currently 72% complete and does not face any technical or engineering setbacks. The contract for the new locks has mechanisms and guarantees to ensure that the project is completed.”