These issues not only underscore the canals’ vulnerabilities but also their crucial role in maintaining the rhythm of global trade. We also explore the strategies traders are employing to navigate these challenges and the outlook for 2024, offering insights into the future of these vital trade routes.

The importance of the Suez and Panama canals on global trade

The Suez Canal, opened in November 1869, is a 193km waterway connecting the Mediterranean Sea and the Red Sea. It provides a direct route for shipping between Europe and Asia, bypassing the need to navigate around Africa.

Approximately 12% of global trade, representing 30% of all global container traffic and over USD $1 trillion worth of goods per annum, passes through the Suez Canal.

This includes energy, commodities, consumer goods, and componentry from Asia and the Middle East to Europe.

The Panama Canal, opened in 1914, is another vital link in global maritime transportation, connecting the Atlantic and Pacific Oceans. It allows ships to avoid the lengthy and hazardous voyage around Cape Horn at the southern tip of South America.

The canal plays a crucial role in global supply chains, supporting the movement of various commodities, including dry bulk, container, chemical tankers, and more.

Both canals have had significant impacts on global trade patterns and the economic geography of many countries. They have facilitated faster delivery of goods, but their importance also highlights the vulnerability of global supply chains, as blockages or disruptions in these canals can have far-reaching effects on global trade.

What the drought has meant for the Panama Canal

Drought has led to decreased water levels in the Panama Canal. Water is crucial for its operation as water is used to raise and lower ships. This has forced officials to reduce the number of vessels they allow through the canal, creating expensive complications for shipping companies.

The decreased water level in the canal is due to a reduction in rainfall in Panama, leading to one of the driest years in the country’s history. The water levels in the Gatun Lake, which feeds the canal, have reduced significantly compared to usual levels during this period. This has led to a severe drought, with water levels in the canal at their lowest in decades.

The drought has also led to delays in transit times, impacting the ability of large cargo ships to quickly traverse the Panama Canal. The Panama Canal Authority has had to implement new operational measures to minimize the impact of the drought. These measures include reducing the number of available reservation slots, which is likely to hinder trade levels, particularly for the U.S. East Coast.

The drought has also forced the Panama Canal Authority to reduce the number of daily transits and the maximum weight of ships. This has led to a significant reduction in vessel traffic, affecting the flow of trade. Shipping containers are piling up along the Panama Canal, triggering a wave of supply chain disruptions. This has led to additional container surcharges imposed by ocean carriers on shippers.

Conflict in the Red Sea – and its implications for Suez Canal attacks

The current conflict in the Red Sea involves Houthi rebel attacks on maritime vessels, which has escalated military tensions in the region. The Houthis, who control a portion of Yemen’s Red Sea coastline, have launched missiles and drones against ships, asserting that their actions are retaliatory against Israel’s military operations.

These attacks have disrupted international shipping and led to a multinational maritime security force, including the U.S. and U.K., to protect ships passing through the Red Sea. The implications for the Suez Canal are significant, as it is one of the world’s most crucial maritime chokepoints, facilitating a substantial portion of global trade.

Any disruption in the Red Sea could impact the flow of traffic through the Suez Canal, potentially causing delays and economic repercussions due to the canal’s strategic importance in connecting the Mediterranean Sea to the Red Sea, and thereby Europe to Asia.

The conflict has attracted international attention, with various nations responding to the threat against shipping in the Red Sea. The U.S. and U.K. have conducted airstrikes against Houthi targets in response to the attacks, and there is concern that the conflict could widen, affecting not just regional but global stability and trade.

Understanding the aggregate effect

The aggregate effect of restrictions on both the Panama Canal and the Suez Canal can be profound for global trade.

These two canals are essential shortcuts for maritime shipping, with the Panama Canal facilitating about 6% of global trade and the Suez Canal handling around 12%.

When operations at these canals are restricted, it can lead to significant delays, increased shipping costs, and disruptions in supply chains.

For instance, the Panama Canal drought meant that ports in Panama, Nicaragua, Ecuador, Peru, El Salvador, and Jamaica have seen 10% to 25% of their total maritime trade flows affected. The Suez Canal’s disruption could add about 10 days to the duration of trips, forcing ships to reroute around the Cape of Good Hope, adding about 3,000-3,500 nautical miles to journeys.

These disruptions can also lead to increased prices for goods. The Panama Canal disruption has resulted in generalized price increases for agricultural commodities and food industry produce in Europe. The Suez Canal disruption could lead to surging prices on goods like oil and gas.

Moreover, these disruptions can force shipping companies to seek alternative routes or modes of transportation, which can further increase costs and lead to delays. Some shipping companies have started redirecting shipments from Asia away from Panama and through the Suez Canal due to the Panama Canal’s drought.

However, with the ongoing conflict in the Red Sea, these companies may have to reroute their vessels around Africa, adding at least a week to the journey.

5 strategies importers and exporters can action to avoid disruption

Goods and commodity traders can employ several strategies to compensate for disruptions in the Panama and Suez Canals:

• Diversification of supply chains: One option is to diversify supply chains to reduce dependence on a single route. This could involve using alternative shipping routes, such as the Cape of Good Hope, or exploring other modes of transportation like rail or air freight.
• Stockpiling and strategic reserves: Traders can maintain larger inventories or strategic reserves of key commodities to buffer against supply chain disruptions. This strategy, however, increases storage costs and may not be feasible for perishable goods.
• Insurance and hedging: Insurance can cover losses from supply chain disruptions. Traders can also use financial instruments, such as futures and options, to hedge against price volatility caused by disruptions.
• Investment in technology: Considering investing in technology to improve supply chain visibility and resilience. For example, supply chain control towers, which use artificial intelligence, can provide timely alerts about possible delays, allowing companies to adjust their strategies quickly.
• Trade shifts: Traders can shift their trade towards regions or countries that have increased their exports due to the disruptions. For instance, traditional trading partners like the United States, Canada, Australia, and New Zealand have heavily increased their exports towards the EU27.

While disruptions in the Panama and Suez Canals pose significant challenges, traders have a range of strategies at their disposal to mitigate the impacts.

The choice of strategy will depend on the specific circumstances of each trader, including their risk tolerance, financial resources, and the nature of the commodities they trade.

The Panama and Suez Canal outlook for  2024

In the Panama Canal, daily vessel passages, expected to reduce to 18, have instead increased to 24, and delays have been minimal. Despite this, water levels remain below average, and the long-term outlook for the canal is concerning.

Meanwhile, the Red Sea crisis has seen increased security issues, with attacks by Yemen’s Houthi forces on commercial vessels causing most container lines to reroute around Africa and the Cape of Good Hope.

It is arguably the Suez Canal that poses the biggest ongoing threat to global trade flows. The lack of security in the Red Sea has led to a halt in transits, and any potential military action to increase security will risk escalating the regional conflict.

Users of freight shipping are advised to monitor the port outlook as 2024 is set to see problematic conditions for at least the first quarter. Resolving the issues in both the Panama and Suez Canals is crucial for the industry, but there are no quick or easy solutions to the challenges currently faced.

The post How international trade will be impacted by Suez and Panama Canal disruptions in 2024 appeared first on Trade Ready.

When we talk about Panama, the first thing that comes to mind is the Panama Canal, the famous maritime crossing channel that connects the Atlantic and Pacific oceans, greatly accelerating world trade for more than 100 years.

Over time, Panama became more than a point of passage, evolving into a center of attraction for investments and businesses due to its legislative innovations to attract capital from all over the world, and the easy and very rapid opening process for off-shore companies (which was abused by various companies and individuals worldwide and which led to a global fiscal and media scandal, but which has since been alleviated thanks to the prompt action of the Panamanian authorities). Panama is still a great country to businesses to invest in with many benefits, particularly for those involved with buying and selling goods.

One of the reasons for this is that in the middle of the last century, Panama sought to take greater advantage of the fact that many ships passed through their country with goods and consequently created the Colon Free Zone.

What is the Colon Free Zone, and how does it help businesses?

The Colon Free Zone (Zolicol or ZLC) is a first-generation free zone located within the city of Colon, Panama, on the Atlantic entrance to the Canal. It is located in the southeastern corner of the City of Colon, occupying 2.4 square kilometers, and it is the largest free port area in ​​the Americas and the second largest in the world, after Hong Kong. It generates an annual volume of close to $20 billion dollars per year in imports and re-exports.

The Colon Free Zone allows companies to save money by avoiding many tax obligations (in Panama) related to their commercial activity while operating within this customs area. There are several available tax benefits offered by the Colon Free Zone:

• There is a tax exemption on imported products for re-export
• No import or export fees or quotas are paid
• No taxes are paid for services that have effects abroad
• Taxes are not paid for the profits obtained in operations abroad. The municipal taxes are not applicable to the companies that operate in the Free Zone
• There are no taxes on capital investments
• Low costs in the rental of land and buildings
• Only 5% tax on dividends

Within the zone, companies can enter, store, display, condition, pack, unpack, split shipments, reload, assemble, group, label, mix, conserve and generally perform all activities related to the operation and handling of all kinds of goods, products, packaging and other commercial effects for import, export and re-export.

The zone includes a collection of services and import centers, storage space, packaging and re-export opportunities for products from all parts of the world, in a diverse set of industries ranging from special electrical products to pharmaceuticals or liquors, among others.

Imports mainly come from China, Singapore and the United States, and goods are then most commonly exported throughout South America, Central America and the Caribbean.

How is the Colon Free Zone organized?

The Colon Free Zone is composed of 9 segregated areas. The most well known is the Casco Viejo, where the majority of company showcases and showrooms are concentrated. The second best known is the France Field area, where the merchandise storage center operates due to its proximity to the Manzanillo International Terminal and Colon Container Terminal ports.

The other 7 segregated areas of the free zone are Coco Solo, Coco Solito, December 20, Logistics Park, Enrique Jiménez Airport, Margarita Island and Davis, where companies like HP, Huawei, Koyo, Sanyo and Sony operate multinational distribution centers.

The transportation of goods in the Colon Free Zone operates through a multimodal transport system called the Multimodal Logistics Platform of World Trade. The system integrates the seaports at Manzanillo International Terminal, Colon Container Terminal, and Puerto de Cristobal; the Panama Railroad; the Enrique Adolfo Jiménez Airport and the Panama-Colón Highway. This free zone is visited by some 150,000 tourists a year from all parts of the world, particularly from the Caribbean, Central and South America, and the U.S.

How to operate from the Colon Free Zone

There are three ways to operate from the Colon Free Zone.

1. Leasing available land within the free zone and building a building. This lease can be signed for 20 years with the option to be renewed.
2. Another way is by renting a space destined for that purpose within the Colon Free Zone itself. This lease is monthly and is paid according to the size of the space in square meters, as well as the duration of the contract.
3. Lastly, you can opt for public storage. This is most common when the expected volume of business is not high enough to justify the rental of a space or the construction of a building. In this case a storage company can provide all the required services.

The payment of these services is usually done on a monthly basis, depending on the volume of merchandise stored. For this, previously the person or society must register with the authorities of the Free Zone.

Opportunities abound for businesses in Canada and worldwide

With all of these available benefits, it could be very interesting for some companies in Canada to establish immediate distribution operations of their products for Latin America. By doing so, they could continue taking advantage of the commercial treaties that are in force between Canada and other Latin American countries, reduce the transit time of goods, and offer more agile transactions for Canadian sellers and Latin American buyers. Companies can also hire local staff to improve customer service in their own language. It will be very advantageous for Canadian businesspersons to expand their vision to be more creative with the multiple tools that exist in the zone.

The post How your business will benefit by operating within Panama’s free trade zone appeared first on Trade Ready.

For Andreina Figuera, moving to Panama with her family at age 15 was an important catalyst in her future career choice.

“My interest in trade and international business started at a very early age. I have always wanted to know how it worked and how the world was connected. This curiosity deepened when I first visited the Panama Canal.”

Remaining in Panama for her education, she then completed her Bachelor’s degree in International Commerce at the Inter American University of Panama.

“This educational experience allowed me to understand that this field requires specialized human resources in foreign trade. I learned about the operational tasks of foreign trade, such as international quotations, adjusting to customer requirements, export and import logistics, issuance and control of documentation, calculation of export and import costs, market surveys, strategic business plans and development of intercultural relations.”

Partway through her program, she started working as an international trade assistant with her current employer, which deals in selling heavy mining and construction equipment.

Initially, this was a helpful way for her to put the theoretical knowledge she was acquiring in school into practical use, further improving her skills. As time went on, her responsibilities expanded and she helped her company expand into new Latin American markets, building a wide series of contacts and learning more about tariff barriers, free trade agreements and the legal and intercultural aspects of trade.

Taking her education to the next level

When Andreina completed her degree in 2013, she knew that it would not be the end of her education. Since then, she has also completed her graduate diploma in senior management in 2016 and her MBA, with a focus on finance, in 2017.

“As a young and dynamic professional, I was very interested in pursuing my continuing education and keeping up to date with the demands that the market presented. The desire to continue advancing professionally and to gather the necessary skills for decision making and to achieve an effective management greatly inspired me to take on post graduate studies in senior management.”

“Completing my MBA also allowed me to have a macro and microeconomic vision of trade. This helped me develop into an agent with deep knowledge in business management, and gave me management skills I needed to make assertive and rational decisions, contributing to my continuing development and progress in the personal and professional field.”

In 2018, she also added the FITT Diploma in International Trade to her educational achievements, earning it via a combination of FITT’s Prior Learning Assessment and Recognition (PLAR) process and the online courses.

“The FITTskills online courses gave me the opportunity to validate what I have learned during my work experience. It was a great experience to take these courses with a reputable and recognized organization, and it is very helpful for professionals in the field to share experience and increase their knowledge.”

Expanding partnership opportunities, new international branches and the Panama Canal itself

During this time her work responsibilities also evolved, and she now works as an international sales executive and commercial representative. This role include everything from helping companies with their business plans and marketing strategies to representing them in trade shows and fairs, negotiating and closing sales deals and managing the legal and administrative aspects of those deals.

One of her greatest professional victories was as part of a team assessing the opportunity to open a new company branch in different Latin American countries, which turned out to be a successful venture.

“After extensive market research and cautious analysis of the political risks, tax requirements, legal framework and more, we decided to open a branch there. I was responsible for defining specific import strategies with different custom agents that would be fiscally optimal and meet all legal requirements, as well as how to best manage our various intercultural relationships in the market.”

She also played an important role in negotiating and managing a new strategic alliance with another leading company in the heavy equipment industry, which helped her expand their sales significantly in different countries within South and North America.

“During different partnership experiences, I’ve been able to negotiate the agreement and manage the logistics, as well as rigorously monitor any commercial issues crossing borders.”

In another career highlight, she played an important role in a team to buy equipment that had originally been manufactured for the use on the Panama Canal expansion project.

“In this process, I had the opportunity to work directly on the contract negotiation for the exclusive international marketing and sales of said equipment. It was especially exciting for me because I think the Panama Canal is one of the greatest engineering masterpieces in the world. The canal changed the world’s transport system, not only because crossing it was the fastest and most effective way compared to the traditional routes of Chile, Africa or the Suez Canal in Egypt, but also because it contributes in a cost reduction of 7% to 17% per shipping container, according to the calculations realized by several logistic operators at that moment.”

Her new challenge is helping her company break into the Canadian market. She is currently working in Montreal as part of a larger strategy to build contacts and attract new business there.

She also decided to spread her knowledge and experience to the next generation, and is now teaching business related subjects at a reputable college in Montreal. She believes that when teaching blends experience with knowledge, it makes a real difference in education.

In 2018, she furthermore became an author on TradeReady, writing the article Are you ready to export? 8 golden rules for success in a new market.

Cementing her expertise with the trade certification to back up her skills

With nine years of experience, the ability to communicate in three languages (Spanish, Portuguese and English), experience visiting over 15 countries throughout Latin America, North America and Europe, and a wide network of professional contacts, in both commercial and educational sectors, Andreina has already built up an impressive resume in international trade.

Her Certified International Trade Professional (CITP) designation is now the latest addition to that resume, which she is proud of and recommends to other professionals looking to get ahead in the industry.

“The challenges and the constant changes worldwide encourage me to continue getting prepared and staying up to date, which is why I was motivated to obtain the CITP®|FIBP® certification. My aim was to validate my capacity and experience, and to acquire more credibility through commitment and interest in the business of international trade.”

“This designation gives exposure for professionals to advance in their careers, as it heightens their profile and which will definitely open new doors to them.”

The post Andreina Figuera, CITP|FIBP – International Sales Executive appeared first on Trade Ready.

1. Around 14,000 ships per year pass through the Panama Canal.

The Panama Canal is a critical waterway that passes through a strategic isthmus in Panama. If it weren’t for this canal, large container ships would have to travel thousands of extra miles around the southern tip of South America in order to cross from the Atlantic to Pacific Ocean, or vice versa.

Such delays would dramatically slow down supply chains for many different industries. The fact that 14,000 ships can cut their journeys in half by travelling through the canal each year dramatically improves efficiency for companies shipping their goods through the area.

To speed things up even more, the canal is currently undergoing expansions, and will be able to handle even more traffic and larger ships as early as April 2016.

2. The largest container ships can carry over 19,000 Twenty-foot Equivalent Unit (TEU) Containers.

In recent years, companies have been competing to build a new class of “mega-ships,” in an effort to reduce shipping costs. These ships are so large that they almost look like mini floating sections of cities. The amount of goods they can carry is astronomical. Made with large steel hulls, these ships are extremely strong and seaworthy.

Currently, the world’s four largest container ships are owned by MSC (Mediterranean Shipping Company), each of which can hold up to 19,224 containers. Each twenty foot container can hold roughly 200 mattresses. So, 19,224 containers is the equivalent of one ship carrying 3,844,800 mattresses!

This total eclipses previous record holders like the Maersk Triple-E class, which could hold up to 18,270 containers, and more recently the CSCL Globe, which could hold up to 19,100 containers.

Cranes can load up all the containers in one port and unload them in another port. This prevents companies from having to use multiple ships or make two or more journeys to ship larger loads, making a major impact on supply chain efficiency.

3. Roughly 1.6 billion cups of coffee are consumed every day.

Coffee is a highly desired commodity around the world, currently being produced in over 70 countries. In fact, coffee is the second most consumed beverage in the world after water. There are over 100 million people who drink coffee in the U.S. every day. Many people who drink coffee like to drink it on a regular basis, so the demand remains high and relatively stable.

The top coffee producing countries in the world are Brazil, Vietnam, Colombia, and Indonesia. The top coffee consuming countries in the world are the U.S., Brazil, Germany, and  Japan.

It is the demand for commodities such as coffee that keeps trade bustling around the world. There are also large coffee chains, such as Starbucks, that operate internationally. This can provide brand consistency across many different regions and further strengthen the coffee trade.

4. Over 85 million new automobiles were sold around the world in 2014.

Similar to coffee, there is a lot of global demand for new automobiles. Automobiles tend to break down and become expensive to fix as time goes on, especially when parts for older models can be harder to access. So, many people simply choose to replace their vehicles every few years with newer models.

In 2013, global automobile sales surpassed the 80 million mark for the first time to reach 82.8 million, and further growth brought the 2014 total even higher. In February 2015, IHS Automotive predicted sales could surpass 88 million around the world by the end of the year.

Demand is likely to continue to increase as the middle class expands in China and other countries with growing economies. The Asia/Pacific region was home to 48% of automotive sales in 2014, with China serving as the world’s largest national market. 23 million vehicles were sold there in 2014, compared to 16.5 million in the U.S.

5. Maersk, one of the world’s largest internationally trading companies, conducts business in 130 different countries.

The Maersk Group is an incredibly important company for international trade. As a whole, the company has nearly 89,000 employees across the world. Its shipping division, Maersk Line, is the largest shipping company in the world and possesses some of the largest container ships in existence, such as the Maersk Triple E line.

Approximately 11 million containers move annually from point A to point B aboard a Maersk ship, and in 2012 the company estimated it had shipped $675 billion worth of goods.

The vast distances between many trading countries make shipping by plane, train, or trucks simply not feasible. For example, it would be very difficult to ship tremendous quantities of many products from Canada to Europe without the transportation services of companies like Maersk.

6. 90% of goods travel by sea.

The reason why so many goods travel by sea is because sea travel is typically cheaper and greener than other alternatives such as airplane transport. Also, container ships can hold far more goods on board than a plane can.

The oceans connect every continent in the world and serve as an excellent interconnected transport system. Oceans are not always calm, however, and the weather can sometimes present challenges to shipping by sea. However, modern container ships are built to withstand extremely strong storms.

Also, there is technology available today to help ships anticipate and steer clear of major storms. So the sea transport is still incredibly important for facilitating international trade.

7. The Port of Shanghai processed 35.29 million TEU Containers in 2014.

The port of Shanghai in China is the largest port in the world, and it processes an amazing amount of goods. In comparison, the ports of Los Angeles and Long Beach, the two largest in North America, combined to process nearly 11 million containers that year, less than a third than that of Shanghai. In fact, in 2014, the Port of Shanghai alone processed almost as many containers as every port in North America combined!

China has a very large manufacturing base and the Port of Shanghai helps to serve as a launching point for Chinese goods to be shipped all across the world. It’s not the only major port across the country, however, as seven of the ten busiest ports in the world in 2014 were located in China.

The United States and other prosperous countries are large consumers of Chinese manufactured goods. So Chinese ports, such as the Port of Shanghai, help China organize its exports to be loaded onto ships and then sent off to their destinations.

8. China exported over 2.3 trillion U.S. Dollars worth of goods in 2014.

In 2014, Chinese exports grew more slowly than expected, but still set a new national record. This made it the top exporter in world. China also has the largest population in the world, and that population has been in transition from an agricultural based economy to an industrial based economy for decades.

These large economic changes have helped expand its manufacturing base and its global exports. In fact, many companies around the world hire Chinese companies to produce products for them because of the high quality and efficiency of manufacturing in the country.

9. More than 38 million jobs in the U.S. alone depend on trade.

38 million jobs is quite an extensive amount. To put it into perspective, roughly 1 in 8.5 Americans, or more people than the entire population of Canada work in trade-based jobs. Many people may not realize that international trade jobs account for such a large percentage of the economy. However, when you consider that shipping, warehousing, supply chain management, transportation, law, retail, sales and many other fields are heavily involved with trade, it makes sense.

Import/export professionals may specialize in trade with one country or many different countries simultaneously. And regardless of which nation is in question, there is a good chance that international trade is critical to the healthy function of its economy.

Which of these global trade statistics surprised you most? If you have more, please add them in the comments!

The post 9 more incredible statistics that show the staggering scale of global trade appeared first on Trade Ready.

The Panama Canal is one of the most important waterways in the world for trade. However, only ships carrying a maximum of 4000-5000 containers can currently fit through the canal. This limits the amount of goods that can flow through the waterway.

Since 2007, the Panama Canal has been under construction. An expansion is currently underway which will dramatically increase the size of the canal, and therefore the size of the vessels that can pass through it. Soon, ships able to hold as many as 13,000 containers will be able to pass through the Canal. This will have three important effects on world trade:

1. Job creation

The fact that the existing Panama Canal can only fit smaller ships is a limiting factor in global trade. It forces companies to use longer or more complicated routes that often pass through congested areas such as Long Beach, California.

So, if larger container ships can fit through the new Panama Canal, this can increase efficiency and profits for the shipping industry by simplifying shipping route options, and decreasing the need for more expensive truck transport as part of the shipping route.

Cheaper transport costs, and a simpler shipping process equate to significant growth potential for the shipping industry.

Growth of an industry correlates to job creation, so the expansion of the Panama Canal can lead to an increase in jobs in distribution.

In fact, in preparation for the increased flow of goods from the expanded Panama Canal, Ohio invested $68.5 million in an Intermodal terminal in Columbus.

This terminal will be used to move shipping containers from vessels coming up the Ohio River to trucks, so that they can reach their final destination. This one terminal alone is set to create 20,000 jobs by 2038!

Boston anticipates that the Panama Canal expansions could help create more jobs for the city as well.

According to the Massachusetts Port Authority, dredging the Boston Harbor to increase its capacity for large ships from the expanded Panama Canal could help generate $4 billion in new business and create thousands of jobs.

Essentially, the expanded Panama Canal will allow goods to traverse the oceans in higher volumes. These higher volumes of goods will require higher volumes of workers in shipping, warehousing, and other supply chain management positions.

2. Major supply chain infrastructure development

If larger ships can pass through the Panama Canal, it means that they will be used more frequently in trans-ocean shipping, and will likely start going to new ports.

This means that ports that make an effort to accommodate larger ships can benefit from the new business they can bring in.

The expansion of the Panama Canal will result in major construction in ports to deepen channels, create new docks, and ensure they will be able to fit these bigger ships.

The ports of Miami, Savannah, Baltimore, and Charleston all already have official plans to make expansions to accommodate the larger ships.

Georgia and South Carolina are also working together to build the Jasper Ocean Terminal. When it is finished, this terminal will be capable of processing 7 million containers per year.

Ships from the Pacific Ocean that were too large to fit through the canal before will now be able to easily cross to the Atlantic Ocean. This means that tons of cargo that previously had to be put on trains or trucks on the west coast can now move by ship to the southeastern United States.

As a result, the Southeast will become much more important to East Coast distribution. Many supply lines will shift in order to use the Panama Canal, and the result will be the formation of new distribution centers and greater transport activity in the Southeast.

3. Substantial increases in business between Atlantic and Pacific nations

Presently, it is much easier for countries or regions that share an ocean to do business with one another. For example, it is easier for eastern Canada to do business with Europe than it is for that region to do business with Asia.

However, the expansion of the Panama Canal could significantly increase the amount of trade between disparate geographic regions.

For example, Marianela Dengo from the Panama Canal Authority’s Market Research Analysis department estimates that “coal exports from Colombia are expected to increase by more than 200 million tons in the next ten years. Colombian coal shipments to China could transit the canal in capsize vessels of 175,000 deadweight tons.”

In other words, the canal expansion is creating business opportunities that could not have been possible otherwise. The economy of scale just didn’t exist on this level.

Another area where the canal expansion could create benefits is in grain transport from the Midwestern United States to Asia. With the maximum capacity of ships able to traverse the Panama Canal set to more than double, there is much more incentive for the Midwest in the United States to sell grains to Asia. If vastly more product can be loaded onto a ship, then this makes the shipping process easier. If the shipping process is easier, then doing business with faraway customers is easier.

The Panama Canal is the equivalent of a strategic bridge. It is a funneling point through which massive amounts of goods must flow in order to keep trade bustling.

The current expansions will enable the Panama Canal to nearly triple its processing capacity. This will change the entire shipping industry as it is known today in a great step forward for international trade.

What other opportunities do you see with the expansion of the Panama Canal?

The post 3 ways the expansion of the Panama Canal will affect global trade appeared first on Trade Ready.