An analyst at the publisher and information firm IHS said the Panama Canal expansion project remains vulnerable to delays arising from problematic labor relations and disputes over cost overruns.
"Meeting the December 2015 deadline is likely to prove difficult, and the project is most likely to be concluded and operations started in the first quarter of 2016, but not later," said the analysis by IHS' Diego Moya-Ocampos.
The completion date for the expansion, originally scheduled for October 2014, was pushed back to December 2015, but Moya-Ocampos said that "escalation of ongoing disputes can potentially result in small delays affecting the completion and launch of operations."
He added that such difficulties "will have little adverse impact on the canal's current operations."
Jorge L. Quijano, chief executive officer of the Panama Canal Authority (ACP), said in June that he expected the canal to open in the first quarter of 2016, perhaps in January of that year.
He also told American Shipper
“I am hoping that because we have so much time between now and the end of the project that some of the time can be picked up.”
Moya-Ocampos said the original completion date was pushed back, in part, because of a seven-month delay in 2011 over disagreements between the ACP and Grupo Unidos por el Canal (GUPC), the contractor of the third set of locks project, over cement quality. In January and February of this year, there was a slowdown in construction and then a suspension of work because of a disagreement between GUPC and ACP over cost overruns, and a two-week stike by construction workers earlier this year.
He said that the largest issue, though, is how the labor unions and canal management interact.
“Labor relations remain strained to date," he said. "Such frequent, low-level disputes will negatively affect the effectiveness of conflict-resolution mechanisms relating to the canal. In this context, it is likely to prove difficult for authorities to prevent further incidents of industrial action prior to the projected delivery date in December 2015, although things are unlikely to turn violent."
Money is another issue, and Moya-Ocampos noted that the canal's original $5.25 billion price tag is now more than $7 billion. Arbitration proceedings to determine ultimate liability for the cost overruns are due to begin in Miami next week on July 21.
"This will reduce the risk of further stoppages over the short term. However, renewed escalations of the dispute may occur at the conclusion of the arbitration (if the decision is contested), or on the back of additional delays or overspends," he explained. "The ACP has previously stated that each day of delay represents $1 million in losses to Panama’s economy. Neither side will be keen to assume any additional expenditure."
He continued, "New delays will mean Panama has to wait longer to obtain the boost in trade and increased revenues from transit from the canal that are likely to result from the waterway's expansion."
Pushing back the completion date even more "will probably also have an adverse impact" on East Coast ports and carriers hoping to use the expanded canal, he said.
"U.S. producers of liquefied natural gas had also counted on the canal being ready in 2014 to ship directly from Gulf coast ports to markets in Asia. Their investments in improved export capacity aimed to benefit from the expanded Panama Canal shortening voyage distances to Asian buyers, therefore reducing LNG transport costs," he said. "On 1 July, Taiwanese president Ma Ying-jeou complained that delays had already disrupted his country's plans to buy U.S. shale gas."
In response to IHS, the Panama Canal Authority said GUPC "
has committed to completing the third set of locks project in December 2015. It is expected that the new lane will open to commercial transits in the first months of 2016."
ACP said its latest figures show the expansion program is 77-percent complete, and that each day more than 7,000 employees in two shifts work in the locks, with another 2,000 on the rest of the expansion projects.
"The third set of locks project continues 20 hours a day. Approximately 85 percent of the concrete required has been poured. The new lock gates are ready and eight are already in Panama ready to be installed. The rest of the program's projects are finished or in process of completion," a spokesman told American Shipper
"The Panama Canal Authority has been closely monitoring the works," the spokesman said, to ensure that the contractor complies with the established timetable for completion and to ensure the quality of work."