Reactions to China’s “Dry Canal” Across Colombia

Recent reports of a proposed Chinese-built railway across , bypassing the Canal, have prompted mixed reactions. The Financial Times noted that responses in Colombian newspaper El Tiempo were “split between horror and hope”. But the head of the Panama Canal Authority told the AFP that “I don’t see that as a competition issue. We are a very important freight shipment hub, and by sea is the most efficient (method).”

A post at Breakbulk, which covers the shipping industry, also expressed scepticism:

China is proposing a 136-mile “dry canal” that would link the Pacific port of Buenaventura with the Atlantic Coast port of Cartagena in Colombia. But why build another transcontinental railway when Panama already has one? The Panama Canal Railway opened nearly six decades before the canal. The railway was a money maker for the first few decades of its existence, but its business disappeared after the first U.S. transcontinental railroad began shipping cargo faster and cheaper in 1869. It still runs today, but most of its business comes from smaller ships serving the West Coasts of Central and South America.

The Panama Canal Railway also is not a viable alternative to the canal for breakbulk and project cargo due to the extra handling required. Even for containers, the handling charges at both ends make it an expensive alternative.

Also, the upcoming expansion of the Panama Canal will allow post-Panamax behemoths to use the canal, carrying more containers in one shipload than 30 trains could. So with the Panama Canal handling upwards of 14,000 ships annually, the potential for a alternative to compete with it appears rather dim.

Direct competition with the canal may not be either China’s or Colombia’s primary objective in any case. China needs coal, which Colombia is eager to sell; the railway would facilitate its transport out of the country’s interior and subsequent shipment from the Pacific rather than Atlantic coast. Colombia would also diversify its trade relations after years of waiting for the US to ratify a free trade agreement, perhaps hoping that the new partnership with China might focus Congressional attention on the matter at last.

Meanwhile, The Economist reports the construction of a new generation of oceangoing giants built to carry Chinese exports:

Maersk’s new “Triple-E” fleet will be the biggest container ships yet seen (artist’s impression above). They will carry 18,000 boxes, 2,500 more than the biggest container ship currently in service, which is also operated by Maersk. The new vessels will use 50% less fuel per container than the present average. That will be good news for the environment and for Maersk’s profitability, as crude oil sails past $100 a barrel.

The new ships will ply the routes between Asia and Europe, so the order is a bet by Maersk that China will prosper long into the future and so will its exports. Container shipping has bounced back remarkably quickly from the post-credit-crisis lows of 2009. The recovery in shipping in the first half of 2010 took many in the industry by surprise as China’s resilience was buttressed by growth in parts of Europe—particularly in poorer countries such as Russia and Turkey—and in America.

February 22, 2011, 10:24 PM
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