- Panama Canal Thrives Amid Global Challenges, Achieves Record Profits.
- Water Crisis Spurs Change in Canal Operations, Boosts Efficiency.
- $8 Billion invested in Future Development and Water Solutions.
Ricaurte Vásquez, Panama Canal Authority administrator, says its economic status is very robust. The Authority has effectively communicated the value of water resources to the maritime market and shipping companies. It has also succeeded despite various challenges throughout the world pandemic. It includes international conflicts, and recent water crises from July 2023 through April 2024 the Canal has successfully adapted, reports Newsroom Panama.
Climate Change Concerns
He acknowledged that the changes brought about by climatic change impact the operations in the long run and said, “Climate change is going to slowly take its toll on us”. He points out the need to value water above everything.
Operational Performance
The Canal has so far recorded operational successes according to Vásquez. It was done while speaking during the Latin American Stock Exchange Investors Forum.
At present, the Canal handles 5% to 6% of world maritime cargo with an operational capacity to conduct 36 permitted transits. It is expected that for fiscal year 2024, the Canal will post net profits of $3.5 billion. 8,227 transits have been recorded within the first nine months.
Transit Capacity and Water Management
“Panama is making a much more aggressive reservation process to make sure that we have a demand that’s met.” He specified that the result of this applied system was that traffic revenue increased because ships with greater capacity passed through to take advantage of the available water resources.
“However, it tells me that notwithstanding all this and despite increasing revenues and despite the fact that unit costs have changed, the operating margin went from 60 per cent – which is gross contribution margin – to 63 per cent – which is the margin we have now. It is a very noble business, very well managed. The waiting times for reliability reasons were reduced from 23.8 hours to almost 11.42 hours”, he pointed out.
Vessel Size and Effective Water Handling
Vásquez said that adding the reserve requirement increased the vessel size to 42,621.33 CP/UMS tons per year from October to June. Average of 39,818.64 tons recorded during the same period of fiscal year 2023.
“This has improved water productivity and at the same time the level of water consumption per transit is reduced with water management,” he added.
Financial Performance and Profit Growth
The Canal administrator also reported that in the third quarter of year 2024, the revenues will amount to $3,714 million. Before taxes and interest, net profit will reach $2,379 million.
“We estimate that net profit for this year should be approximately $3.5 billion with 24 transits on average, which leads to a decision on how to manage the operation of the Panama Canal in terms of efficiency, in terms of volume and in terms of timing to manage prices in a different way,” he said.
Water Valuation Price Structure
Vásquez described the various prices associated with the different usages for the interoceanic route. A fixed fee was established where the ship must pay a minimum fee of $300,000 if it uses the Neopanamax. If it uses the Panamax, the fee is $100,000, which provides an approximation of the value of the water.
“One of the most important things that have been done in the last five years is to establish an explicit value for water. Because if it is a scarce commodity and competes with human consumption and the operation of the Panama Canal, we must have, and the country must have, an economic value for water.”
Canal’s Net Worth and Future Investments
According to Ricaurte Vásquez, Canal’s total assets are around $16 billion, with obligations that are subtracted in the amount of $1.5 billion, thereby closing the net worth approximately at $15 billion.
“This net worth has been increasing from $10.3 billion in 2019 to what we have now of $15.2 billion”, said the administrator.
Strategic Investment for Panama’s Global Role
“What we are going to need in the future is to make approximately $8 billion in additional investment. Not only in what has to do with water but in all the other elements that are important for the continued development of Panama’s geographic position as an international trade centre.”
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Source: Newsroom Panama
