2006-2016 Panama Canal expansion project: it’s implications and its influence in transpacific liner shipping

Introduction

Summary of the Aim of the Project

The project aimed at identifying the implications and analysing the influences of 2006-2016 Panama Canal expansion projects in transpacific liner shipping.

Description of the Topic

Panama Canal is viewed as a simulated waterway, which is positioned in the republic of Panama. It ties Pacific Ocean with the Atlantic Ocean through a canal. The Panama Canal expansion project has been undertaken in order to establish smooth connection between Pacific and Atlantic Ocean without the requirement to transit the lengthy and often dangerous Cape Horn route via Magellan straits and Drake Passage. Thus, with the completion of this project, Panama Canal can be viewed as trade shortcut amid the states located throughout Pacific and Atlantic Oceans (Branch, 2014). The Panama Canal expansion project is related to maritime industry developments along with demands, as it focuses on increasing cargo load capacities and attracting larger vessels to cross the canal bound to the US East Coast ports or cross the canal bound for ships departing towards the Asian economies (Rodrigue & Notteboom, n.d.). The project is expected to have implications and influences on global-regional trade and transpacific liner shipping. In terms of global-regional trade, the implications and the influences of Panama Canal expansion project can be determined as increasing cargo along with destination flows, developing trade regulations and smoothening worldwide freight distribution as well as supply chain management (SCM) procedures (Sabonge, 2014). Correspondingly, the transpacific liner shipping is likely to be influenced by Panama Canal expansion project by ensuring better integration of global maritime transportation and strengthening liner shipping networks. Moreover, characterising market power and maintaining collaboration with different service providers are also expected to have an effect on both global-regional trade and transpacific liner shipping extensively (Liu et.al., 2016).

Research Question and Objectives

The research question for this study is presented below.

• How the Panama Canal expansion project is going to influence the dominating transpacific liner shipping sector and what implications it could have on Caribbean-US East coastline ports?

Based on the above designed research question, the following study objectives will be considered:

• To identify the categories of maritime sectors operate as liner shipping
• To assess the role of Panama Canal existence and its 2006-2016 expansion project
• To analyse the reasons for which liner shipping dominates transits via Panama Canal, both in terms of number of vessels and cargo capacity
• To determine the ways and the level up to which the Panama Canal expansion project is expected to attract transits of oceanic vessels
• To investigate whether the expansion of Panama Canal is able to provide Caribbean and the US east coast ports a leading transshipment role over its central American/US-west coast counterparts

Short Summary of Methodology and Research Tools

A qualitative approach of research methodology has been considered for this study in order to appraise the implications and the influences of the 2006-2016 Panama Canal expansion project in transpacific liner shipping. The various research tools to be used for this study are primary along with secondary data, positivist theoretical approach and thematic analysis. Contextually, the primary data to be collected for this study is through semi-structured interview procedure, while the secondary data will be gathered using scholarly journal articles and books.

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In chapter 2, a literature review will be conducted based on the research topic “2006-2016 Panama Canal expansion project: Its implications and its influence in transpacific liner shipping.” Correspondingly, the research methodologies considered for this study to draw valid inferences are to be discussed in detail in chapter 3.

Literature Review

Introduction

In this chapter, various aspects related to the study, i.e. the kinds of maritime sectors operating as liner shipping, role of Panama Canal existence along with its 2006-2016 expansion project and the impacts of the project on liner shipping sector and Caribbean-US East coastline ports are to be discussed. It is necessary to include a literature review chapter, as a part of the project, which will help in justifying the research and providing a greater level of understanding about the identified issue in-depth.

Types of Maritime Sectors Operating as Liner Shipping

According to Sabonge (2014), liner shipping is perceived as one of the most effective transportation modes for goods. It is fundamentally regarded as a service through which goods are transported by different means, such as tankers and dry bulk ships among others. Based on the observations of Sabonge (2014), liner shipping travels regular routes based on its set timetables. As per the study findings of the U.S. Department of Transportation (2013) and Cambridge Systematics, Inc. (2011), the distinct categories of maritime sectors operating as liner shipping include containers, tankers, dry bulks, general cargo and reefer break-bulk cargo carriers. As per the observations made by Sabonge (2014), the Transatlantic, Asia-Europe and the Transpacific are the major trade routes for the container segment. Under this specific maritime sector, it can be observed that neo-panamax ships and post-panamax vessels represent nearly about 53% of the fleet capacity. It is expected that this percentage will increase in the future through the Panama Canal expansion project, resulting into developed transportation capacities (Sabonge, 2014). The report of the U.S. Department of Transportation (2013) further emphasised that container ships have become the biggest as well as the fastest-growing maritime segment over the previous few decades for the Panama Canal.

Davis et.al. (2015) further noted that rapid technological changes are affecting the demand of transportation modes, which in turn, have created a necessity to increase trade flows by an extensive level. As mentioned in the report of the U.S. Department of Transportation (2013), transportation of bulk liquids, which encompass oil products, liquefied natural gas (LNG), petrochemicals, crude oil and chemicals, requires tankers. These are viewed as single-deck vessels, which have the ability to carry bulk liquids in sealed tanks (U.S. Department of Transportation, 2013). According to Sabonge (2014), the tanker segment operates as major liner shipping because it leads towards industrial development by improving financial conditions and developing environmental regulations. With regard to the study findings of Sabonge (2014) and U.S. Department of Transportation (2013), dry bulks and general cargo also operate as a chief liner shipping sector, as these lead towards a higher level of infrastructural development and better handling of cargoes respectively. Correspondingly, the report of the U.S. Department of Transportation (2013) highlighted that reefer break-bulk cargo carriers operate as a fundamental liner shipping segment, as these possess an accelerated carrying capacity of the perishable products that necessitate temperature control and insulation.

Role of Panama Canal Existence and Its 2006-2016 Expansion Project

According to Morris (2016), Panama Canal has a greater role to play in providing significant advantages to the shippers who intend to perform deep sea shipping. These shippers have the desire to remain involved into deep sea shipping with the intention of yielding more gains by exploiting shorter passages with bigger sized ships (Morris, 2016). As per the study findings of Morris (2016), the Chinese entrepreneurs are keen to invest substantial amounts on a project, which will focus on servicing ships larger than the limit of Panama Canal even after its expansion. Therefore, the existence of Panama Canal is likely to improve the general well-being and thereby, ensure long-term sustainability of the shippers and the entrepreneurs as well, who have the desire to gain maximum returns to perform the various sea shipping activities (Morris, 2016). Based on the observations made by Branch (2014), the role of 2006-2016 Panama Canal expansion project can be determined as establishing close connections between Pacific and Atlantic oceans.

With regard to the report published by Expansion Program Panama Canal (2014), the project performed certain activities that helped in creating trade shortcuts amid the states positioned around Pacific and Atlantic Oceans. These activities comprised enlarging the two-existing set of locks as well as deepening-enlarging canal entrances and generating a third traffic line for post panamax ships transiting Panama Canal, both from Pacific and Atlantic Oceans by the creation of the two new channels (Canal De Panama, 2014). According to Rodrigue & Notteboom (n.d.), the role of 2006-2016 Panama Canal expansion project can also be determined as developing the container segment by attracting bigger ships and thereby increasing trade flows. With regard to the report published by the U.S. Department of Transportation (2013), the role of 2006-2016 Panama Canal expansion project can be evaluated from its potential effects on inland infrastructure and the US ports. It is thus believed that this project has increased the standards of the US ports as well as the inland infrastructure by allowing a better passage for bigger container vessels and thereby, decreasing the expenses of trans-ocean shipping (U.S. Department of Transportation, 2013).

However, as mentioned in the report of UNCTAD (2015), the major roles of 2006-2016 Panama Canal expansion project are recognised as increased readiness of the US ports and associated infrastructure, enhanced vessel management capability, wider advancement in marine highways and better improvements in concentrated cargo sizes. In order to determine the role of Panama Canal existence and its 2006-2016 expansion project, the report of U.S. Department of Transportation (2013) further revealed that the project has an impact on shipping in two ways. One – it facilitates the passage of ships to transit the canal successfully through the use of larger locks along with channels; and two – by increasing the ability of the vessels to pass through the canal regularly, because of new locks and channels (U.S. Department of Transportation, 2013).

Determination of the Extent to Which Panama Canal Expansion Project is Expected to Attract Transits of Oceanic Vessels

According to Sabonge (2014), the 2006-2016 Panama Canal expansion project is expected to attract transits of oceanic vessels by a considerable extent. This might be owing to the reason that the project entails deepening as well as widening navigable channels, encompassing the Pacific and the Atlantic Oceans, the Gatun Lake and the Gaillard Cut (Sabonge, 2014). Sabonge (2014) further revealed that construction of two new locks complexes, specifically on the Atlantic entrance and the Pacific side, cannot be ignored while determining the level up to which the Panama Canal expansion project is likely to attract transits of oceanic vessels. In this context, Sabonge (2014) also noted that the container segment played an important role in facilitating the project to attract transits of oceanic vessels by an extensive level. Ungo & Sabonge (2012) were also of the view that the container segment is the biggest market sector at the Panama Canal in terms of revenues. During the period 1997-2007, the container sector at the canal witnessed a steady and an incessant growth due to the introduction of more effective liner services, particularly in the Asia-East Coast US route. This in turn had facilitated the 2006-2016 Panama Canal expansion project to attract transits of oceanic vessels at large (Ungo & Sabonge, 2012).

However, Ungo & Sabonge (2012) noted that in the year 2008, the recession factor changed this trend by lessening the figure of liner services through waterways from 43 in the year 2007 to 33 in later phase of the year 2011. This decline in the liner services was also caused because of decreased cargo volumes that were geared to the US, which resulted into consolidation of the container segment and failure to attract transits of oceanic vessels (Ungo & Sabonge, 2012). According to Sabonge (2014), the focus of the Panama Canal Authority on enhancing the economic performance and making substantial investments to develop the existing services of the canal, also contributed into attracting transits of oceanic vessels by a considerable extent. It was thus that the canal service is duly measured by Canal Waters Time (CWT), which allows the canal to raise vessel transits and reliability at large. This factor also had a contribution in driving the 2006-2016 Panama Canal expansion project to attract transits of oceanic vessels (Sabonge, 2014).

The report of the U.S. Department of Transportation (2013) further revealed that since the initiation of 1914, the Panama Canal has been proven a major constituent of the worldwide transportation network. This is owing to the reason that the canal serves in excess of 140 maritime trade routes over 80 nations, wherein it is estimated that 5% of the global maritime cargo travels the Panama Canal each year (U.S. Department of Transportation, 2013). Therefore, as mentioned by Sabonge (2014), the major elements of the 2006-2016 Panama Canal expansion project that include deepening the entrances of the canal and elevating the maximum operation level of Gatun Lake, had an extensive impact on attracting transits of oceanic vessels.

Effects of 2006-2016 Panama Canal Expansion Project on Liner Shipping Sector and Caribbean-US East Coastline Ports

As Rodrigue (2010) had argued, continuous developments in the global trade, since the 1990s, have imposed pressures on the Panama Canal to handle increasing number of ships in a timely and an effective manner. Therefore, the rationale of the 2006-2016 Panama Canal expansion project can be better understood as not only to develop the liner shipping sector, but also to establish a close link between Pacific and Atlantic Oceans (Rodrigue, 2010). Thus, as mentioned in the report of U.S. Department of Transportation (2013), the chief elements of the project, such as widening the entrances of the canal and introduction of new locks along with channels have an impact on liner shipping sector. Ungo & Sabonge (2012) further affirmed in this regard that the number of liner services in the maritime segment have been decreased because of segment consolidation, diminishing cargo volumes that are geared to the US and subsequent service rationalisation. It is thus expected that the expansion project is likely to impose positive impacts on the liner shipping sector by increasing huge figures of cargo volumes geared to the US by introducing new locks and channels (Ungo & Sabonge, 2012; Rodrigue, 2010).

With regard to the study findings of Notteboom (2007), the effects of the 2006-2016 Panama Canal expansion project on liner shipping sector can be better understood as increasing international trading flows and expanding lock capacities in the Panama Canal. Based on the report of Canal De Panama (2014), the positive impacts of the expansion project on liner shipping sector can be measured in terms of enhanced water supply as well as draft dependability and development in various navigation channels. Similarly, as mentioned by Sabonge (2014), the 2006-2016 Panama Canal expansion project has an impact on Caribbean-US East Coastline Ports as well. For instance, according to Fan et.al. (2012), the Caribbean-US East Coastline Ports is likely to be influenced by the expansion project through increased shipping capacities, developed capabilities and ensuring better as well as effective ship movements. Sabonge (2014) believed that with the expansion, the potentiality of Panama Canal as a successful transshipment centre will increase to rest of the regions of Latin America and Caribbean. Therefore, it is expected that the performance and the sustainability of the Caribbean-US East Coastline Ports will increase due to growing shipments through various channels and deployment of bigger vessels (Sabonge, 2014).

The report of the U.S. Department of Transportation (2013) revealed that the 2006-2016 Panama Canal expansion project covered excavation of new navigation channels to establish close connection amid the new locks and the existing channels. This connection, with the help of navigation channels, imposes significant impacts on the Caribbean-US East Coastline Ports by permitting two-way vessels passage, thereafter changing operational structures of the biggest container segment (U.S. Department of Transportation, 2013). As observed by Sabonge (2014) and Rodrigue (2010), the Caribbean-US East Coastline Ports are positively influenced by the expansion project in terms of increased distribution size of transiting vessels and developed reservation systems to comply with different navigation rules.

Summary

Based on the literature review findings obtained for this study, it can be affirmed that the 2006-2016 Panama Canal expansion project has an impact on Liner Shipping Sector and Caribbean-US East Coastline Ports. Dry bulks, tankers and containers among others, recognised as the major maritime sectors operating as liner shipping. Considering that the number of liner services has declined during the period 2007-2010 due to a slowdown in cargo volumes geared to the US, expansion of Panama Canal is expected to develop the liner shipping sector by determining fluctuations in shipping cycles and raising speed of the vessels each year. Correspondingly, the expansion project also has a positive impact on Caribbean-US East Coastline Ports, which can be duly measured in the forms of close affiliation between locks and channels, allowing the two-way vessels passage.

Research Methodology and Methods

Introduction

In this chapter, the different methodological approaches planned to be considered for this study have been discussed in detail. These methodological approaches include research philosophies along with paradigms, research method, tools of data collection, interview format, sampling, piloting, response rate, validity and ethics.

Research Philosophy and Paradigm

Research philosophy is defined as an approach to clarify study designs by making relevant assumptions and developing new knowledge. The different categories of a research philosophy include positivism, pragmatism and interpretivism (Collins, 2010; Wilson, 2010). Correspondingly, a positivism research philosophy will be followed for this research in order to address the identified study issue. This particular research philosophy has been selected owing to its contribution in exploring various social phenomena that are subjected to reality and natural science (Coleman, 2014; Schutt, 2006). Correspondingly, research paradigm is described as a way to examine social phenomena, based on which specific understandings of the expansion of the Panama Canal can be obtained and thereby explanations can be drawn accordingly to accomplish the research objectives. Functionalist, radical humanist, interpretive and radical structuralist are identified as the four research paradigms relevant to any study (The Pennsylvania State University, 2016). Interpretive paradigm is also considered for this study, as it helped in understanding the impacts of the 2006-2016 Panama Canal expansion project on transpacific liner shipping.

Research Method

Qualitative, quantitative and mixed methods or approaches are generally used for any research. Qualitative method involves obtaining required information in non-numerical forms. On the contrary, quantitative method seeks to obtain numerical data to draw valid inferences. Mixed method involves both qualitative and quantitative approaches to identify and explore various social phenomena (Tewksbury, 2009; Hanson & Grimmer, 2007). In lieu, a qualitative research method has been adopted for this study in order to gain insights about the implications and the influences of the 2006-2016 Panama Canal expansion project, particularly on transpacific liner shipping.

Discussion of Data Collection Methods

Both primary and secondary data have been collected for this study. For instance, primary data are collected using the semi-structured interview process, involving individuals who have been involved in the Panama Canal expansion project. Correspondingly, secondary data was retrieved by accessing various scholarly journals, books and articles that relate to the identified research issue.

Discussion of the Interview Format

The interview questions to be designed for this study have been fundamentally based on open-ended format. Under this format, the participants are asked questions directly relating to the research issue identified. The interview questions have been accordingly presented in an orderly manner with the objective of acquiring a systematic understanding about the implications and the effects of the Panama Canal expansion project on the transpacific liner shipping. The design of the research instrument also helped in the data collection process by analysing the perceptions and the experiences of the selected interviewees, concerning the identified study issue.

Distribution and Return Process of the Interview Conducted

The interview questions have been asked directly to the involved participants. Considering that all the interview questions are based on open-ended format, an attempt has been made to select and consider only the interested participants in the process. This practice eventually restricted returning questions during the interview schedule.

Sampling

The participants of the interview for this study are the supervisors and the workers involved in the 2006-2016 Panama Canal expansion project. Random sampling method is undertaken for this study in order to ensure that all the respondents are provided with an equal opportunity to participate in the interview process and thereby, an overall satisfactory response rate is obtained.

Response Rate

The sample size of the respondents considered for this study is 15, out of which 10 are the supervisors and the remaining 5 are the workers involved in the interview procedure. All the 15 respondents participated in the interview process, indicating a 100% response rate.

Piloting

The research tools or instruments considered for this study were tested prior to their use by ensuring that appropriate research method is used and the interview questions are easy to respond. Moreover, testing of the research tools or instruments prior to their use was also made by analysing the obtained primary and secondary data, through the utilisation of thematic approach.

Validity

The validity of the results obtained for this study is maintained by accessing those secondary sources that relate to the identified research issue. Correspondingly, the reliability of the findings has been preserved by preparing and asking similar interview questions to the involved participants.

Ethics

In the course of this study, emphasis has been provided to ensure compliance with the general ethical issues while conducting the research. These practices encompassed maintaining confidentiality of the personal information of the involved interviewees and obtaining consent from them prior to their participation in the interview procedure.

Summary

Use of qualitative, positivism philosophy and interpretive paradigm further resulted into drawing valid inferences for this study by exploring the social phenomena of the 2006-2016 Panama Canal expansion projects and its implications as well as influences on the transpacific liner shipping. Maintaining validity and reliability of the findings obtained by performing various ethical practices ensured improved generalizability of this research as well.

Summary

The 2006-2016 Panama Canal expansion project has been taken into concern with the objective of creating close links amid Pacific and Atlantic Oceans without the need to travel the lengthy and often unsafe Cape Horn route through Magellan straits and Drake passages. The various categories of maritime segments, operating as liner shipping, are dry bulk ships, containers, general cargo and tankers. The Panama Canal existence has an important role to play for the shippers who wish to remain engaged into deep-sea shipping to obtain maximum gains by exploiting shorter passages with larger size ships. Correspondingly, the role of the expansion project can also be determined as developing the standards of the US ports and inland infrastructures by lessening trans-ocean shipping expenses and allowing passages for larger container vessels. Various significant aspects, such as construction of two new locks in the entrance of Atlantic and the Pacific side and introduction of more effective liner services suggest that the expansion project is able to attract transits of oceanic vessels substantially. Furthermore, the effects of the 2006-2016 Panama Canal expansion project can be witnessed not only on liner shipping sector but also on the Caribbean-US East Coastline Ports as well. For instance, widening the entrances of the canal and the introduction of new locks along with channels have affected liner shipping sector by increasing cargo volumes and expanding lock capabilities in the Panama Canal. Correspondingly, the Caribbean-US East Coastline Ports are also influenced by the expansion project by ensuring better ship movements and allowing two-way vessels packages.