Wood Mackenzie: Panama Canal Expansion Delays Pose Global Trade Risks

Wood Mackenzie, a global leader in commercial intelligence for the energy, metals and mining industries, is expecting the recent cost overrun disputes around the Panama Canal expansion to be resolved with limited disruption due to the significance of the Canal to global trade.

Significant disruptions will crimp profitability for US LNG producers, create a tighter LNG shipping market and affect the US Gulf Coast petrochemical industry.

“Given the enormous strategic and financial importance of the Canal to Panama, we expect the gridlock to be resolved,” said Andrew Buckland, Senior LNG Shipping Analyst at Wood Mackenzie. “If the delays last 6 –12 months, it will have limited impact, as trade will carry on much as it does now, but further delays threaten the investments of a significant number of groups that are set to benefit from expanded capacity on the waterway.”

The expansion will benefit users depending on the position of their ports in relation to the canal, particularly the US, whose cargo accounts for 65% of total cargo moved through the canal.

“When completed, US coal suppliers will see some of the greatest benefits from the expansion as they will realise substantial cost and time savings, even when compared with Colombian and Venezuela suppliers. The shortening of the route to Asian markets will result in greater opportunities,” added Jaime Correal, Senior Coal Markets Analyst at Wood Mackenzie.

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Press Release, February 25, 2014