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Monday, December 13, 2010

Trade, Shipping - Panama Canal - a closure due to rains.

Trade existed as a integral part, Centuries ago and the journey of goods between the supplier to buyer was through a chain known as trade route.  Ages ago existed, Silk route, spice route and other routes.

Those were not the days of Bill of lading and various conventions that are in vogue now.  Shipping terminology is a vast area and understand that there are ‘dry’ and ‘wet’ shipping.  Contrary to common misconception, ‘dry shipping’ means cargo claims against sea carriers and disputes under charter parties.  ‘wet shipping’  refers to the type of claims that usually attend maritime disasters such as collisions and oil spills. It would also include Salvage, General average, tortuous liability for collisions and statutory liability of ship owners for pollution.

This is not about age old law or the modern day practice but more about flooding which cost billions  to a small Nation.  This 77km canal that joins Atlantic Ocean and Pacific Ocean is the key conduit for international maritime trade.  A ship sailing from New York to San Francisco via the canal travels 8370 km (5200 miles), well under half the 20900 km (13000 miles) route around Cape Horn.

Panama is a country in the southernmost tip of South America, bordered by Costa Rica, Colombia, Carribean sea and Pacific Ocean.  This was a Spanish settlement.   A canal built by the US Army Corps of Engineers between 1904 – 1914 is raking millions of dollars. The canal owes its origin to the French around 1880 but the modern day canal is an effort of US.   The management of the zone passed on to Panama in 1999.  It is reported that around 14,000 ships pass through the Panama Canal each year, representing about 5% of world trade.

It is an engineering marvel that the waterway was cut through one of the narrowest saddles of isthmus that joins North and South America.  
The canal consists of artificial lakes, several improved and artificial
channels, and three sets of locks.   The ships pass through the buoyed entrance channel in the Gulf of Panama in Pacific side, travels through Miraflores locks, lake, Pedro Miguel lock, Gaillard Cut slices, Chagres River, Gatun Lake, Limon bay – to the other side.   The size of the locks determines the maximum size of ships allowed passage. Because of the importance of the canal to international trade, many ships are built to the maximum size allowed. These are known as Panamax vessels.   The Canal uses a system of locks -compartments with entrance and exit gates. The locks function as water lifts: they raise ships from sea level (the Pacific or the Atlantic) to the level of Gatun Lake (26 meters above sea level); ships then sail the channel through the Continental Divide.

Ships take an average of 8 to 10 hours to transit the Panama Canal.  The Panamas Govt.  earns revenue based on a a mathematical formula for the measurement of total ship volume.  A net Panama Canal ton is equivalent to 100 cubic feet of volumetric capacity.  The appropriate rate is applied depending on whether the ship is laden or in ballast (empty).    Most of the vessels are charged on the basis of their actual displacement tonnage.  One displacement ton is equivalent to one long ton or 35 cubic feet of salt water.   Long ton is equal to 2,240 pounds (1,016 kg). USA tops the users list followed by China, Chile, Japan and South Korea.  India is 55th in the list. 

This month there has been heavy flooding resulting in closure of the Panama canal for the first time in 21 years.  It is reported that this closure arising out of weather if first of its kind since it opened in 1914.  Previously the operations in the canal were closed in Dec 1989 when US troops invaded to topple President Manuel Noreiga. 

There are official reports that from 9th Dec 2010, transits and normal operations have resumed at the Panama Canal  which is good news for the Traders and Shipping industry.

Regards – S. Sampathkumar.

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    -Panamerican Shipping

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