The Panama Canal expansion project (), also called the Third Set of Locks Project, doubled the capacity of the Panama Canal by adding a new traffic lane, enabling more ships to transit the waterway, and increasing the width and depth of the lanes and locks, allowing larger ships to pass. The new ships, called New Panamax, are about one and a half times larger than the previous Panamax size and can carry over twice as much cargo. The expanded canal began commercial operation on 26 June 2016.

The project has: Built two new sets of locks, one each on the Atlantic and Pacific sides, and excavated new channels to the new locks Widened and deepened existing channels Raised the maximum operating water level of Gatun LakeProposal for the Expansion of the Panama Canal by the Panama Canal Authority

Then-Panamanian President Martín Torrijos formally proposed the project on 24 April 2006, saying it would transform Panama into a First World country. A national referendum approved the proposal by a 76.8 percent majority on 22 October the same year, and the Cabinet and National Assembly followed suit. The project formally began in 2007."Canal, Consortium Reach Deal to Complete Work" by the Wall Street Journal (en inglés)

It was initially announced that the canal expansion would be completed by August 2014 to coincide with the 100th anniversary of the opening of the Panama Canal, but various setbacks, including strikes and disputes with the construction consortium over cost overruns, pushed the completion date back several times. Following additional difficulties including seepage from the new locks, the expansion was opened on 26 June 2016. The expansion doubled the canal's capacity. On 2 March 2018, the Panama Canal Authority announced that 3,000 New Panamax ships had crossed the canal expansion during its first 20 months of operation.

Background

The original Panama Canal had limited capacity determined by operational times and cycles of the existing locks and was further constrained by the current trend towards larger (close to Panamax-sized) vessels transiting the canal, requiring more transit time in the locks and channels. Also, periodic maintenance on the aging canal required shutdowns of the waterway. Demand was growing due to the growth of international trade, and many users required a guaranteed level of service. Despite the gains which have been made in efficiency, the Panama Canal Authority (ACP) estimated that the canal would reach its maximum sustainable capacity between 2009 and 2012. The long-term solution for the congestion was the expansion of the canal with a third set of locks.

The size of ships that could transit the canal, called Panamax, was constrained by the size of the locks, which are wide and long, and deep. The third set of locks allow transit of larger, Post-Panamax ships, which have a greater cargo capacity than the current locks can handle. The new lock chambers are wide, long, and deep. These dimensions allow for an estimated 79% of all cargo-carrying vessels to transit the canal, up from 45%.

All of the canal-widening studies since the 1930s determined that the best way to increase canal capacity was by building a third set of locks larger than the 1914 locks. The US began excavations for new locks in 1939, but abandoned them in 1942 because of the outbreak of World War II. This conclusion was again reached in the 1980s by the tripartite commission formed by Panama, Japan, and the US. More recently, the studies developed by the Panama Canal Authority () for its 2025 master plan confirm that a third, larger set of locks is the most suitable, profitable, and environmentally responsible option.

President Martín Torrijos, in a 24 April 2006 speech announcing the project, said that the canal "is like our 'petroleum'. Just like the petroleum that has not been extracted is worthless and that in order to extract it you have to invest in infrastructure, the canal requires to expand its capacity to absorb the growing demand of cargo and generate more wealth for Panamanians".Panama to Vote on Canal Expansion Oct. 22, The Washington Post

While the canal expansion was being completed, and considering the high operational costs of the vessels, the long queues that occur during the high season December through March (sometimes up to a seven-day delay), and the high value of some of the cargo transported through the canal, the ACP implemented a Transit Booking System and Transit Slot Auction to allow a better management of the scarce capacity available and to increase the level of service offered to the shipping companies. The scheme gives users two choices: (1) transit by order of arrival on a first-come, first-served basis, as the canal historically has operated; or (2) booked service for a feea congestion charge. The booked service allows two options of fees. The Transit Booking System, available online, allowing customers who do not want to wait in queue to pay an additional 15% over the regular tolls, guaranteeing a specific day for transit and crossing the canal in 18 hours or less. ACP sells 24 of these daily slots up to 365 days in advance. Since 2006, ACP has made available a 25th slot, sold through the Transit Slot Auction to the highest bidder. The second choice is high priority transit. The main customers of the Transit Booking System are cruise ships, container ships, vehicle carriers, and non-containerized cargo vessels.

Cargo volume

The Panama Canal Authority predicts that the volume of cargo transiting the canal will grow by an average of 3% per year, doubling the 2005 tonnage by 2025. Allowing larger vessels to transit the canal will move more cargo per transit and volume of water used.

Historically, the dry and liquid bulk segments have generated most of the canal's revenues. Bulk cargo includes dry goods, such as grains (corn, soy, and wheat, among others), minerals, fertilizers, coal, and liquid goods, such as chemical products, propane gas, crude oil, and oil derivatives. Recently, containerized cargo has replaced dry bulk as the canal's main income generator, moving it to second place. Vehicle carriers have become the third-largest income generator, replacing the liquid bulk segment. Shipping industry analyses conducted by the ACP and top industry experts indicate that the canal expansion will be beneficial to both the canal and its users because of the demand that will be served by allowing the transit of more tonnage.

The growth in usage of the Panama Canal over the past few years has been almost entirely driven by increased US imports from China passing through the canal en route to ports on the US East and Gulf coasts. But it is increasingly recognized in both the US and China that this imbalance in trade is unsustainable and will be reduced via some sort of adjustment in the coming yearsWhy the U.S.–China Trade Imbalance is Unsustainable (although such an imbalance need not be made up by physically shipped goods, but could be made by other trade such as intellectual property as China upgrades its intellectual property protection laws). The ACP, however, presumes that trade will continue to grow for a generation as it has for the past several years.

One of the central points made by critics of canal expansion, most prominently former canal administrator Fernando Manfredo, is that it is unrealistic to attempt to predict canal usage trends over a generation, improbable to expect that US imports from China will continue to grow for a generation as they have the past few years, and irresponsible to bet Panama's financial future on such a projection.

Competition

The most direct competition to the canal comes from alternative routes that present options for transporting cargo between the same points of origin and destination.

The opening of the Russian Northern Sea Route and the Canadian Northwest Passage to commercial traffic could pose an alternative to the canal in the long term. Warmer waters in the Arctic Ocean could open the passage for an increasing number of months each year, making it more attractive as a major shipping route. However, the passage through the Arctic would require significant investment in escort vessels and staging ports. The Canadian commercial marine transport industry does not anticipate that this route will be a viable alternative to the Panama Canal within the next 10 to 20 years.

The two main current competitors of the Panama Canal are the US intermodal system and the Suez Canal. The main ports and merchandise distribution centers in these routes are investing in capacity, location, and maritime and land infrastructure to serve post-Panamax container ships and their larger cargo volumes. According to the ACP, the growing usage of such ships in transcontinental routes competing with the canal is irreversible. It was estimated that by 2011 approximately 37% of the capacity of the world's container ship fleet would consist of vessels that did not fit through the canal, as it existed prior to 2016, and a great part of this fleet could be used on routes that compete with Panama.

The proposal states that strengthening the canal's competitive position will allow it to accommodate demand and serve its customers. If the canal had the capacity to serve the growing demand, Panama could become the most important connectivity hub on the continent by joining north–south continental routes and east–west transcontinental routes. Accordingly, the canal will continue to be viable and competitive in all of its routes and segments, and contribute significantly to Panama's development and growth while maintaining its position as a major world trade route.

Predictions According to the studies conducted by the ACP in 2005, the canal would reach its maximum sustainable capacity between 2009 and 2012. When it reached this capacity it would not be able to continue to handle growth in demand, resulting in a reduction in the competitiveness of the Panama maritime route.

As approved by the Panamanian people, construction for the expansion project was slated to conclude by April 2016. The ACP said it would use all possible means to stretch capacity until the construction was completed.

The proposed expansion of the canal by the construction of a third set of locks would allow it to capture the entire demand projected through 2025 and beyond. Together, the existing and new locks approximately double the capacity of the canal.

Critics such as former legislator Keith Holder, co-author of the legislation that created the ACP, pointed out that canal usage is seasonal and that even during the few months when it is most crowded, the bottleneck that slows traffic is not the locks but the narrow Culebra Cut, which has a limited capacity for large ships to pass one another.Analysis: Expanding the Panama Canal By INGRID VASQUEZ

Although the canal was nearing its maximum capacity, it did not mean that ships were unable to transit it. Rather, the canal's growth capacity stagnated and that it could not capture additional cargo volumes.

The former head of the Panama Canal's dredging division, Thomas Drohan, a critic of the expansion plan, discounted allegations that this is a problem in the short term. He argued that if the supply of any good or service becomes short, businesses can raise their prices; this would apply to Panama Canal tolls as much as it does to petroleum.

The project

Locks The original canal has two lanes, each with its own set of locks. The expansion project added a third lane through the construction of lock complexes at each end of the canal. One lock complex is located on the Pacific side, southwest of the existing Miraflores Locks. The other is located east of the existing Gatun Locks. Each of these new lock complexes have three consecutive chambers designed to move vessels from sea level to the level of Gatun Lake and back down again.