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Panama Canal considers legal action after delay

The Panama Canal has taken the first steps in what may end up a legal battle for hundreds of millions of dollars as delays and shoddy construction work have postponed the opening of the new channel until April next year. ShippingWatch interviews the canal's administrator Jorge Quijano.

Every tradesman knows that large constructions made of concrete need to be reinforced with steel. This is why the Panama Canal's chief administrator, Jorge Quijano, is puzzled that there is once again uncertainties concerning the canal's opening date, as cracks have been discovered in the large lock gate designed to guide ships through the new and wider channel. It turned out that there was insufficient reinforcement steel to keep the concrete in the gates in place.

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"The designer has not delivered the necessary quality. We hope, and still believe, that the expanded canal will be ready to open in April. Work to repair the cracks is in progress and we expect it to take three months. We estimate that we are losing USD 1 million per day that passes. The original plan was to inaugurate the new channel in October 2014, so all in all, we will have lost USD 450 million when the new structure is ready for use," says Quijano in an interview with ShippingWatch.

He still expects that the canal will open in April next year, though with a slight risk that the deadline may be pushed forward, but at most by a few weeks, he stresses.

Alphaliner: Panama to reclaim lost market from Suez 

The Panama Canal has yet to sign contracts with carriers who will use the new dimensions offered by the canal. In the past year, the management of the 100-year-old waterway between the world's two largest oceans has witnessed how the world's other major waterway, the Suez Canal, has been able to complete its expansion in record time, while plans to build a canal through Nicaragua look closer to realisation. The giant project to build a canal through another Central American country is, however, surrounded by big questions and doubts within the maritime industry.

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The contractor group responsible for the canal expansion program, Grupo Unidos por el Canal (GUPC), has assured that the cracks, which were recently discovered during tests of the new locks at the end of August, will be repaired within the next three months. The method is to simply drill holes in the concrete and to insert more steel plates into the concrete as reinforcement. The relationship between the Panama Canal and the Spanish-led consortium has been strained at times, with employees resigning and deadlines failing to be met, contributing to the tension. Disagreement as to the financing as well as walk-outs caused sharp divisions between the two parties in summer 2014, with the Panama Canal at one point publicly suggesting that GUPC could be headed for bankruptcy, which GUPC immediately denounced in a subsequent statement.

Panama retakes first place ahead of Suez 

In the beginning of August last year, the two sides reached an agreement on the completion of the project.

The daily loss of USD 1 million that the Panama Canal has suffered in the period from the date of the original project deadline and until the expected opening in April next year next year, combined with potentially lost market shares, could now result in lawsuit for damages, Quijano tells ShippingWatch.

"It's something we're discussing with our lawyers," he says.

Cracks discovered in the new Panama Canal

Alphaliner: Panama to reclaim lost market from Suez

Panama retakes first place ahead of Suez

New Panama Canal will benefit US East Coast 

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