Panama Canal sees slow rebound for 2010

World shipping continues to be slow and although the canal had a slowdown in 2009 it was fortunate that revenues were not down too significantly. The canal commission has come forth with their expectation for 2010 to be flat or the same as 2009. But their gross revenues should exceed 2008 due to significant increases in tolls.  They expect to make a profit of about $900 million, a tidy sum.

Panama Canal Sees Slow Revenue Rebound As Sea Trade Lags
By Inti Landauro, Down Jones Newswires

PANAMA (Dow Jones)--After weathering the financial and economic crisis that crippled global trade, the Panama Canal expects to see a modest rise in revenue this year as the recovery takes time to filter through to the shipping industry.

"This year will be flat, it will be very similar in terms of volume," Alberto Aleman, the chief executive of the Panama Canal Authority said in an interview. "We are seeing the same tonnage."

The Canal's revenues fell to $1.96 billion in the fiscal year 2009--which ran from October 2008 to September 2009--down from $2.01 billion in 2008. The forecast for this year is $2.02 billion, Aleman said.

The canal's net profit will probably fall to around $960 million from $1.01 billion in 2009 and $1.03 billion in 2008.

Despite the world economy's recovery, the canal's business will take time to pick up, Aleman said. The shipping industry always lags the rest of the economy as orders take several weeks to reach ports, and it takes companies time to get enough confidence to increase inventories, Aleman said.

The canal's fiscal year also includes the fourth quarter of 2009, when a recovery wasn't obvious in countries trading through the canal.

Although the global crisis caused a sharp drop in overall trade, the Panama Canal suffered only modestly. About the same number of ships moved through the waterway in 2009 as in 2008, but tonnage fell 3%.

Transportation of bulk loads has already improved, while shipping of containers and vehicles is still low, Aleman said.

Canal revenue last year was affected by rebates the canal gave to its customers, included considering as empty container ships that were less than 30% full.

The rebate is scheduled to end in May, when a new fee structure is expected to be announced following discussions between the Canal Authority and industry players.

About 5% of all the world's seaborne goods pass through the Panama Canal, which joins the Atlantic and Pacific oceans.

The canal is expanding its capacity to allow more and wider ships to cross the Central American isthmus. The project includes the construction of two new sets of locks and two new short stretches of canal parallel to the existing one.

The expansion was initially estimated to cost $5.25 billion, but it's now likely to be about $380 million less than that because of competitive bids by private contractors, Aleman said.

Just over $1 billion of the investment is earmarked for unforeseen events, so it's likely at least a portion of this figure won't be spent.

The official said the expansion will be ready in 2014, as scheduled.

The Canal Authority has secured $2.3 billion in loans for the expansion from the European Investment Bank, the Japan Bank for International Cooperation, the Inter-American Development Bank, the Andean Development Corp. and the World Bank's International Finance Corp.

The rest of the money will come from the canal's own cash flow. In 2012, the most active year, the Canal Authority will transfer around $1 billion to the expansion contractors.

The largest of them is the group formed by Spanish construction firm Sacyr Vallehermoso (SYV.MC), Italian firm Impregilo (IPG.MI), Belgium's Jan de Nul Group NV and Panama's Constructura Urbana SA. The group has started construction of the new sets of locks, which will cost $3.12 billion.