Double-Wide: Who's Set to Benefit From the Expanded Panama Canal?
The historic renovation could be a boon for US ports, but right now the US is falling behind other global players.
Batista, who is Brazil's richest man, is leading the charge, and has placed himself on both sides of the potential boon better access to China will provide the Brazilian mining industry. In addition to building the Açu Superport, his EBX Group owns the modestly sized iron-ore miner MMX Mineracao e Metalicos (MMXM3.SA), which along with Companhia Siderurgica Nacional SA (SID) has recently been stealing marketshare away from Vale S.A.
Brazilian iron-ore miners are not the only South America interests poised to benefit from greater access to China and the rest of Asia. Lax says Colombian coal producers will likely see huge benefits too.
According to Sourcewatch.org, Colombia not only has the largest coal reserves in South America, but is the biggest coal producer there as well. It's the fourth largest coal producer in the world, and since hydroelectric damns provide a wide majority of Colombia's domestic electricity, the country is able to export a majority of its reserve. Colombia's mining minister Carlos Radado has said that coal output will reach 144 million tons by 2020, which has until now been restricted to European markets because of proximity and shipping costs.
It's important to note that Colombian coal is highly valued for its low-sulfur content, and considering China -- the world's largest producer and consumer of coal -- recently announced it's seeking to restrict coal consumption due to environmental concerns, Colombia's soon-to-be accessible clean burning reserves should be looking extremely attractive.
"The biggest competition for coal being imported to China is Indonesia," Lax says. "It has a tremendous advantage over places like Colombia because of transportation issues, but the expanded canal just might change that analysis."
The largest mining operation in Colombia is Carbones del Cerrejón Ltd, which is a joint venture between BHP Billiton, Anglo American plc (AAL), and Glencore International plc (GLEN). Vale S.A. recently sold it's Colombian mining assets for $407 million to the mining company Colombian Natural Resources, LLC, which is controlled by Goldman Sachs Group, Inc. (GS). Alabama-based Drummond Company, Inc. is a major player in the region as well.
Liquid Natural Gas
One of the biggest potential advantages of the expanded Panama Canal for the US lies in the Liquid Natural Gas market. At a recent discussion on the economic impacts of larger Canal hosted by the University of Houston, Michael Economides, a professor of chemical and biomolecular engineering, explained the expansion as "defining" moment for the American energy sector.
"The reason for that is LNG, liquid natural gas," Economides said. "The Panama Canal expansion will allow for super tankers to be able to traverse (the canal). We would be exporting energy from the US."
The increased use of hydraulic fracturing, aka 'fracking,' has exploded the size of the United States' natural gas reserves. From 2006 to 2008 new findings raised the estimated amount of extractable natural gas by 35%. The most efficient way of transporting this clean-burning gas is to liquefy it, hence creating liquefied natural gas.
Drillers are having a difficult time finding domestic buyers to "absorb the glut," according to Businessweek. Congress has granted Cheniere Energy, Inc. (LNG) permission to build an extension to its Sabine Pass gas terminal located in Cameron Parish, Louisiana, which will become the largest liquid natural gas export facility in the US. A number of other companies have applied for permits with the US Department of Energy to become exporters -- application is required by a 1938 law. However, the Department of Energy has put these permits on hold until it concludes a study on the economic effects of exporting the gas.
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