Volume shipped through the Panama Canal could dip because of the ongoing fallout from tariffs primarily instituted by the US against its biggest trading partner, China, with resulting retaliatory tariffs adding to global trade tension.
Last year the 82km waterway handled 403.8 million tons of cargo. But this could all change as shipments between the two countries slow down as penalties pick up speed. Canal Authority chief Jorge Quijano stressed that the isthmus-bisecting artery was one of the Central American country’s leading economic drivers but was wholly dependent on healthy trade between the two sparring countries.
“Most cargoes passing through come from or go to the US or China,” he said. Since the respective administrations of Donald Trump and Xi Jinping sparked the current spat, Panama, foreseeing a potential loss of canaldriven profit, has gone into crisis mode, focusing largely on identifying alternative cargo opportunities. One of these is Brazil which appears to be taking over from the US as China’s new source for bulk dry imports. A primary crop will be soya beans, formerly mass imported by China from the US. Quijano said that soya shipments from Brazil were expected to “boost canal traffic”.
Reuters reported that “Brazilian soya had traditionally been shipped across the Atlantic and Indian oceans, but farmers in soya state Mato Grosso earlier this year signed a memorandum of understanding with the canal to look at ways to cut transport costs and increase grain volumes using the waterway via ports in the north of Brazil.”
The southern American country exports around 60 million tonnes of soya beans every year and last year only about two million tonnes were shipped east through the canal. Quijano believes that it wouldn’t take much to convince Brazil to shift more dry bulk through harbours north of Rio de Janeiro, like Porto do Itaqui, especially considering the proximity of Mato Grosso to Brazil’s northern shore. Brazil and Argentina have already increased their market share of bean exports to at least a quarter of the annual global average.
Argentina, however, mainly uses routes around the continent’s southern tip of Tierra del Fuego if not making use of corridor arrangements it has with Chile. Quijano said the Canal Authority was also looking at liquefied natural gas (LNG) as a means of supplementing expected cargo drop-offs resulting from diminished US-China trade. About 90% of LNG originating in the States passes from the Atlantic through the canal to the Pacific bound for China.
Mexico for the time being appears poised to become one of the country’s taking over from the US in fulfilling China’s LNG needs.
Brazil appears to be taking over from the US as China’s new source for bulk dry imports
