Panama Canal Chief Warns $23B MSC Port Deal Could Threaten Canal’s Neutrality

Ricaurte Vásquez Morales, the administrator of the Panama Canal Authority (ACP), has raised serious concerns about a $23 billion global port sale involving Mediterranean Shipping Company (MSC) and U.S. investment firm BlackRock, warning that it could threaten the canal’s neutrality and harm Panama’s competitiveness in global trade.

Morales said the sale of ports currently owned by Hong Kong-based CK Hutchison Holdings includes two key terminals in Panama, Balboa and Cristobal, located on either side of the canal. He cautioned that the deal, if finalised as currently structured, might lead to a concentration of power under one shipping giant, which goes against the long-standing principle of neutrality that governs the canal.

The Panama Canal operates under a neutrality agreement established through treaties signed in 1977 during U.S. President Jimmy Carter’s administration. These treaties led to the eventual handover of the canal from U.S. control to Panama by December 31, 1999. The neutrality clause ensures that the canal remains open and impartial to vessels from all nations.

The proposed transaction involves MSC and BlackRock taking control of 43 ports across 23 countries, including the Panama terminals. MSC, the world’s largest ocean carrier would gain significant leverage with control over such a large portion of port infrastructure.

Rival shipping companies and logistics operators have raised concerns that this move would give MSC an unfair advantage, allowing it to dominate transshipment routes and pricing. Vásquez confirmed these fears, calling the current state of global port competition “a significant battleground on transshipment capacity.” He said some ACP officials were worried the canal could lose traffic if Hutchison’s existing customers moved their operations to other ports controlled by MSC.

U.S. President Donald Trump has repeatedly claimed the Panama Canal is under Chinese influence due to CK Hutchison’s ownership of the Panama ports. He even said the U.S. should “take back” the canal, calling the sale to MSC and BlackRock a win for America to reduce China’s influence.

China doesn’t control the canal, but it strongly opposed the sale. Per reports, Chinese President Xi Jinping was furious that Hutchison moved ahead with the deal. In response, China’s antitrust regulator, the State Administration for Market Regulation (SAMR), launched an investigation and warned against splitting the Panama ports from the full 43-port deal to avoid review. Under pressure, Hutchison considered selling some or all of its 10 remaining Chinese ports separately.

Vásquez said the Panama Canal should use this situation as a chance to diversify. He suggested restarting a delayed project to build a terminal at the Port of Corozal, on the Pacific side of the canal. This would let the canal operate its own terminal and rely less on outside companies.

“This is a great opportunity to bring a new proposal,” Vásquez told the Financial Times.

Besides the MSC port deal, the Panama Canal Authority (ACP) is also under pressure from the U.S. Federal Maritime Commission (FMC). The FMC is closely monitoring how the canal allocates transit slots, especially after last year’s severe drought led to restrictions on ship traffic and increased tolls. FMC Chairman Louis Sola recently called the canal’s operations the commission’s “number one priority,” adding that U.S. officials are watching how the ACP manages drought-related challenges.

The ACP is working with the U.S. Army Corps of Engineers to improve water management to address future climate risks. A new reservoir is being planned in the Indio River area to help stabilise the canal’s water levels and prevent future transit reductions due to drought.

Additionally, the ACP is also exploring ways to diversify its business. Vásquez revealed that the authority is considering building a pipeline along the length of the canal to transport up to 1 million barrels per day of liquefied petroleum gas (LPG).

The pipeline would allow ships to unload cargo like LPG and ethane on one side of the canal and reload it on the other, freeing up valuable canal capacity for other shipments, including liquefied natural gas (LNG), which is in rising demand from Asia.

The pipeline would also help recover traffic lost during the 2023 drought, which caused many LNG customers to shift to alternative routes due to limited transit slots and higher tolls.

Meanwhile, U.S. authorities have requested that American government ships be allowed to pass through the canal for free. Vásquez responded that such a move is not legally possible, pointing out that even Panama’s own navy ships must pay tolls. “Free is not an option as presented,” he said, adding that any changes would have to comply with existing laws and treaty obligations.

References: Reuters, sourcingjournal

Source: Maritime Shipping News