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June 23, 2014

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INTERNATIONAL MARITIME 46 THE JOURNAL OF COMMERCE JUNE 23.2014 By Peter T. Leach THE PANAMA CANAL is likely to see a boost in container traffic as a result of China's squash- ing of the P3 Network among Maersk Line, CMA CGM and Mediterranean Shipping Co. "If there is no P3 leaving China, which is the main source of cargo, then that means the cargo will have to go on several vessels, and that puts on a better perspective for us for the next several years," Panama Canal Administrator Jorge Quijano told the JOC. "It may result in more ships carrying cargo out of China, and I'm sure some of it will actually come back to this route," he said. "From our standpoint, it will probably be good for the Panama Canal because we still are an alternative to getting cargo to the East Coast, but it's too early to tell what the final outcome will be once the dust settles." Quijano said the Panama Canal Author- ity is well on its way to resolving contractual disputes with two of its contractors on the project to build a third set of locks that will accommodate container ships with triple the capacity of the current Panamax vessels. As a result of an agreement reached with the contractors, he said the canal would be able to open the new locks to traffic in January 2016. Although the dispute over cost over- runs by the GUPC consortium building the new locks is being arbitrated by an indepen- dent board of three arbitrators and they may rule against the authority, the canal authority is still working with the original cost estimate of $5.25 billion for the project. "We have $100 million to $200 million built into that amount for contingencies," Quijano said. After a two-week work stoppage by GUPC last winter over the dispute, the authority reached an agreement in principle that will allow the group to delay repayment of the amounts advanced to it for work on the locks until after they are completed. The two parties are negotiating an amendment to their contract that Quijano hopes to sign by the end of July. "That way the $400 mil- lion loan that they have secured to complete the project will be exercised," Quijano said. The members of the consortium already have lined up the $400 million in loans that they need to complete work on the locks. Manuel Manrique, CEO of Sacyr, the Span- ish engineering firm leading the GUPC consortium, said this month that the group is committed to finishing the locks by the end of 2015, according to Quijano. "We are gearing up to have vessels go through the new locks in January of 2016, but of course, we depend on what the performance of our contractors ends up being," he said. As a result of another arbitration agree- ment, the canal authority will pay $41 mil- lion to cover the cost overruns incurred by the consortium of companies that is build- ing the 3.8-mile Pacific Access Channel, known as PAC4. The companies in this group include FCC of Spain, ICA of Mexico, and MECO of Costa Rica. The arrival in Panama this month of four more of the eight lock gates being fabricated in Italy was a strong sign the canal author- ity is back on track toward completing the project by 2016. Delivery of the rolling gates had been delayed by the lack of a suitable semi-submersible project cargo vessel that could carry the gates. Quijano said the last four gates would be delivered by December. "Two gates are ready to be shipped, and the last two ... should be done in the next couple of months." JOC Contact Peter Leach at and follow him on Twitter: @petertleach. A PLUS FOR PANAMA CANAL The P3's demise could boost traffic through the waterway in the run-up to its new locks opening in January 2016 carriers announced their schedules in Octo- ber, gaining an extra call on the alliance's Asia-North Europe service. Rotterdam, the Belgian port's main rival, lost three export calls and two import calls, more than half its Europe-Asia calls. Zeebrugge and Hamburg also lost out; Bremerhaven was unchanged, while Jade Weser, virtually empty since it opened in September 2012, gained a much- needed call. Rotterdam stands to be the main win- ner from the P3 collapse. It didn't expect to lose traffic from the reduced number of P3 services because it would have handled a higher number of Maersk's Triple E ves- sels, which are capable of carrying 18,000 20-foot-equivalent container units. Still, fewer calls would have reduced harbor dues and meant less work for ship pilots and tug- boats. Europe's biggest container port, how- ever, doesn't think the container shipping industry will stand still following the demise of the P3. There are "more questions than answers," a Rotterdam port spokesman said. "We will have to let the dust settle." "It is still too early to make any pro- nouncements as to the possible conse- quences," a spokesperson for the Antwerp Port Authority said. The port will contact its partners to determine the precise impact of the scrapping of the P3 network, she added. While MSC rethinks its post-P3 strategy, the Geneva-based carrier at least can take solace from the fact that the Port of Antwerp allowed it to consolidate its activities in the port and quit its current facility more than 15 years before its concession expired in order to handle the extra traffic that MSC expected under the alliance with Maersk and CMA CGM. And, although the collapse of the P3 is a blow for Maersk, MSC and CMA CGM, it provides an extra boost for Hapag-Lloyd, whose merger with Chile's CSAV was largely driven by the German carrier's bid to keep in touch with the world's three larg- est container lines. JOC Contact Bruce Barnard at

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