Nicaragua- pie in the sky?

Aug 09 2013

The credibility of the proposed canal across Nicaragua is beginning to gain some credence, despite the scepticism that surrounded the story when it first broke.

In June, Wang Jing, the owner of HKNG Group (a telecom company) signed a contract with Nicaragua’s President Ortega, which will give the Central American nation 51% of the new canal company.

Wang unveiled a $40 bill plan for a 170-mile waterway linking the Pacific to the Caribbean. It was said that construction would begin in December 2014 and the project would be completed within five years, Gibson Research reported quoting various sources.

No details of the proposed canal’s physical dimensions have been released other than “Nicaragua would be able to accommodate the new generation of ships ranging up to 250,000 tonnes (dwt).”

So will there be a need for another canal? Gibson queried.

Should the proposal go ahead, it will be in direct competition with the enlarged Panama Canal and that can only mean good news for those currently being forced to pay the higher tariffs implemented by the Panama canal authorities, the broker said.

Wang was reported to have said that by the time the canal opens in 2020, world trade would be at a level that could viably accommodate two Pacific/Atlantic waterways.

However, Gibson has remarked in previous reports that the new canal would give little, or no advantage to the tanker market and said that it is difficult to see the Nicaraguan proposal providing significantly more opportunities – even without knowing the exact specifications.

If the stated vessel size limitations are to be believed, it will certainly rule out a fully laden VLCC, although part laden cargoes may be of some interest. With Asian appetite for crude from the Americas increasing, this suggests an opportunity for larger cargo sizes.

Distances from Venezuela to Asia are considerably shorter via Panama than going round the Cape if the destination is anywhere north of Thailand. For example, Venezuela to Ningbo is 12 days shorter (basis 12 knots), Gibson said.

The proposed canal will be more than three times the length of the Panama Canal. However, the difference in distances over the existing routes appears to be negligible.

Certainly Nicaragua has more to gain than to lose, as such a project could bring huge revenues to one of the world’s poorest nations. The project still remains unfunded, but it is believed that investment from Europe, or the US is unlikely, particularly as the latter already has huge investments in Panama.

Wang proposes to name his investors in the next two months, but even Chinese appetite for this project may be a step too far, Gibson concluded.

*This plan ranks alongside the new Bosporus and the Thai Peninsular canal proposals in being a good idea on paper but totally unfeasible in practice.

However, several people thought that Ferdinand de Lesseps was completely insane in the 19th century and perhaps he was, but look what he accomplished. But remember, his achievements came in a totally different era when huge engineering projects ruled the world, not like today – Ed.



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