Panama

Who needs it? Northwest passage open.

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The canal intermediating between two oceans is the perfect example of a monopoly exchange hub. Routing around it will have tremendous disruptive effects. Immediately this changes the pricing situation. The Panamanians collect 600 Million a year in revenue on tolls, a price that is presumably set in “consultation” of the US government. I have no idea what we spend a year on “their” “security” and we have, of course, invested a bit in that area over the years. Adding Canada to the pricing discussion will be complex, but probably not intractably so. The Panamanians are currently engaged in a 5 Billion dollar canal upgrade. Canada faces some significant startup costs to govern their alternate route. The world hasn’t ever managed to eliminate piracy in the south china seas.

Governments aren’t the only players.  The shipping business has a dominate player, it’s Walmart/Microsoft/Saudi-Aramco/what-have-out, i.e. Maerk Line. They are currently building a set of 10+ container ships able to hold 14 thousand standard shipping containers (TEU). When those go by on the superhighway one guy is driving the truck. These ships have a crew of 13. These are the largest cargo ships in the world, but yet they conform to the standard dimensions required by the canal. Maerk has 1.7 Million TEU of shipping capacity.

I bet some people are rerunning the numbers on a lot of projects: that one, the canal upgrade, the cost of regulating a new route.

Nations whose funding runs through a single bottleneck have a tough time dealing with disruptions to that bottleneck. Which is why one worries about Mexico’s stability as their oil run out. I guess we can add Panama to that list.

When disrupting an existing exchange hub it’s de rigor to leverage each way your alternative is maximally different from the competitor. I wonder what can be made of the near term seasonality of this new route. I bet we will see a lot of PR about how environmentally beneficial the reduced energy usage of this new route is. Should be quite interesting for ship design, since presumably you don’t have to fit through the canal anymore.

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