Canal Construction Brings New Business Opportunities for Shipping

The construction of the canal will bring down the cost of shipping and will also bring more investment opportunities. "If the new canal is built, it should be good news for China's shipping companies. After all, there is an alternative route for competition. The choice of shipping companies is more selective and the cost of related rates is also expected to be reduced." Secretary of China Shipping Container Lines Co., Ltd. Ye Yumang said recently that at present, China Shipping's cargo from China to the East Coast of the United States will generally take the Panama Canal, which will account for about 10% of the company's cargo volume.

According to public information, China is now the second largest user of the Panama Canal after the United States. 88% of the Panama Canal's business volume is trade goods between the United States and the Asia-Pacific region, while trade goods from China account for 38%.

COSCO Group and China Shipping Group are also the main carriers on this line. As early as 2010, Wei Jiafu, chairman of COSCO Group, publicly complained during a speech at the Panamanian Parliament that the Panama Canal can only pass 40 ships a day, and nearly 100 ships a day are waiting to cross the river.

An insider of another shipping company under China Shipping Group also told this reporter that due to width restrictions, there are currently about 80,000 tons of dry bulk ships that can pass through the Panama Canal, and more are 100,000-ton or even 400,000-ton ships. It is impossible to pass through the Panama Canal and can only bypass the southernmost point of South America. The voyage must be more than 10,000 kilometers.

It is also because of the importance of geographical location that the shipping costs on the Panama Canal have also increased year after year. In the past 10 years, the toll for the Panama Canal has doubled. According to the Panama Canal Authority's annual report, in 2012, the canal toll income reached 1.85 billion U.S. dollars. In August of that year, the Panama Canal Authority decided to increase prices again in October 2013, and the general cost will be higher than the current cost. 15%.

It is worth noting that when the Panama Canal decided to expand in 2010, it had expected more companies from China to participate in the construction. One Chinese company had obtained the river excavation project. At present, there are dozens of Chinese companies investing in Panama. China, China Shipping, COSCO, Huawei, Tsinghua Tongfang and other Chinese companies have invested in Panama for several years.

In addition to the Panama Canal, the local government is still building larger airports, docks, bridges, and subway projects. This also gives China's foreign contracted engineering companies more opportunities. Currently, emerging cast pipes, China Construction Engineering, Sany Heavy Industry, etc. Both are located in the area. All these have provided references for the business opportunities embodied in the Nicaraguan Canal Project.

The construction of the Nicaraguan Canal Project has also provided many business opportunities for many companies, including Chinese companies.

A person close to the Hongkong Nicaraguan Canal Development Investment Co., Ltd revealed to this reporter that with the advancement of the project, the project itself may involve Chinese state-owned enterprises, manufacturing companies and construction and construction companies all have.

However, it is also the expansion of the Panama Canal, which has brought more uncertainty to the construction and operation risks of the Nicaraguan new canal.

“After the canal is widened, it is expected that a 100,000-ton dry bulk carrier can pass through the Panama Canal, and whether or not the Nicaraguan new canal will be competitive depends on the specific rates and allowable vessel capacity.” According to the above-mentioned insiders of the Group, from the perspective of future freight demand, although the absolute amount of global trade will still increase, if the shipping market continues to be sluggish, the demand for shipping companies to use larger ships may be limited.

Some people in the industry who have long been engaged in overseas projects pointed out that Chinese companies must first understand clearly the investment policies of local countries, such as labor restrictions, funding requirements and corresponding laws and regulations, in addition to detailed assessment of investment returns before deciding to invest. Avoid the uncertain risks as much as possible.