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The Panama Canal is an artificial waterway that connects the Atlantic and Pacific Oceans via the narrow Isthmus of Panama. It is a lock-type canal, which allows vessels to be lifted and lowered across the various elevations along the route.

The Panama Canal provides a shortcut for vessels, allowing them to avoid the lengthy route around South America via Cape Horn and so reduces voyage times. As a result, it is considered to be one of the world’s most important shipping corridors. 

Why is the Panama Canal important?

The Panama Canal is very important to today’s interconnected modern world because it impacts shipping, energy and global trade flows.

  • Reduces voyage distance and transit time
    The Panama Canal significantly reduces transit times between Asia, the Americas and Europe by enabling vessels to travel from the Atlantic Ocean, through the Caribbean Sea, across the Isthmus of Panama, and into the Pacific Ocean. This saves vessels from having to travel all the way around Cape Horn at the southernmost tip of South America.

  • Supports global trade flows
    Maritime transport is the backbone of international trade with approximately 80% of all global trade (by volume) transported via sea. Serving more than 180 maritime routes, the Panama Canal plays a critical role in connecting international shipping networks and facilitating global trade flows.
  • Is strategically important for container, LNG, LPG, tanker and dry bulk markets
    The 2016 expansion of the Panama Canal now enables larger carriers to transit. This strengthened its importance across several key sectors, including container shipping, LNG, LPG, tanker and dry bulk markets. It also means that LNG and LPG carriers can now transit the canal, providing a direct route between US Gulf Coast export hubs and major demand centres in Asia.

  • Influences global supply chains
    The canal's importance extends far beyond Panama itself. As one of the world's most important maritime chokepoints, any reduction in transit capacity or disruptions to the Panama Canal affect global supply chains, voyage planning, freight rates and vessel deployment decisions.

Where is the Panama Canal?

 

The Panama Canal is located in the country of Panama in Central America. The canal occupies a strategic position between North and South America, extending approximately 80km between the Atlantic and Pacific Oceans. Its geographic position means it acts as a gateway between Atlantic and Pacific trade routes, which also makes it a major global trade chokepoint. 

The Panama Canal journey follows a route of eight main components:

  1. Atlantic entrance at Colón
  2. Pacific entrance near Panama City
  3. Gatun Locks
  4. Gatun Lake
  5. Culebra Cut
  6. Pedro Miguel Lock
  7. Miraflores Locks
  8. Pacific exit

 

When was the Panama Canal built? 

 

The Panama Canal was officially opened on 15 August 1914. At the time, it represented one of the largest engineering projects ever undertaken.

Later, in 2016, the Third Set of Locks were opened, giving us the Panama Canal that we know today. This major expansion enabled much larger Neo-Panamax vessels to transit the canal, which has significantly increased its capacity and fundamentally altered:

  • Container shipping economics
  • LNG trade patterns
  • Vessel design decisions

 

Interestingly, the first attempt at building the Panama Canal came much earlier in 1881. The French project, led by Ferdinand de Lesseps, unfortunately failed due to health challenges amongst construction workers as well as engineering issues. Then, in 1904, the project rights were acquired by the US who completed the construction of the canal in 1914.

 

How wide is the Panama Canal 

 

The width of the Panama Canal varies significantly by section. At different points along the route, the dimensions of the canal’s waterways change. For example, the width of the Panama Canal is different at the Culebra Cut to its width at Gatun Lake. Similarly, the Neo-Panamax locks are substantially wider than the original lock system.

 

Who manages the Panama Canal?

 

The Panama Canal is managed and operated by the Panama Canal Authority (ACP) on behalf of the Republic of Panama. The ACP is an autonomous public agency that functions independently of the country’s day-to-day government administration. 

Responsibility for the canal was transferred from the United States to the Panama Canal Authority on 31 December 1999 under the terms of the Torrijos-Carter Treaties. Since then, the ACP has overseen the administration, operation, conservation, maintenance and modernisation of the waterway. Its key responsibilities for managing the Panama Canal include:

  • Transit scheduling and vessel coordination
  • Vessel traffic management and navigation control
  • Water resource management
  • Infrastructure maintenance and upgrades
  • Maritime safety and operational compliance
  • Expansion and modernisation projects

 

Through these activities, the ACP helps maintain the Panama Canal's position as one of the world's most important maritime trade routes.

 

How many boats go through the Panama Canal a day? 

 

Approximately 35 to 40 vessels go through the Panama Canal each day according to daily transit reports from the ACP. However, it is important to note that the exact figure varies from day to day according to water levels, demand and operational restrictions. For example, in recent years, lower water levels in Gatun Lake have caused drought conditions which prompted the Panama Canal Authority to introduce operational restrictions. These measures have resulted in reduced transit capacity at certain points along the Panama Canal.