The Panama Canal’s operator plans to sell rights to two plots of land reserved for the construction of two new ports, as the government agency aims to curb the influence of any one ocean carrier on the waterway.
Two weeks after the Panama Canal Authority unveiled its desire to enter the ports business on its own via a Bloomberg report, the operator told the Wall Street Journal it wants to bring in more suitors to compete with the likes of Mediterranean Shipping Company (MSC) and Cosco Shipping.
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Both container shipping giants are tied to a controversial $22.8 billion pending transaction that would exchange the hands of two ports positioned on opposite sides of the Panama Canal. MSC and BlackRock formed a consortium to buy the Balboa and Cristóbal ports, alongside 41 other ports throughout the world, from port operator CK Hutchison.
Geopolitical tensions have kept that deal on ice, with Chinese state-owned Cosco reportedly seeking inclusion in the final transaction. CK Hutchison has confirmed it had considered inviting a Chinese investor into the acquisition but did not identify the company.
The Hong Kong port operator still believes a sale has a “reasonable chance” of occurring, but ruled out that the Panama ports deal would be completed this year.
Ricaurte Vásquez Morales, the head of the Panama Canal Authority, had already warned in June that the initial deal as constructed posed risks to the canal’s neutrality. Now, Vásquez wants to ensure a wider swath of terminal operators and ocean carriers get a crack at ownership around the trade waterway.
“We need to boost container capacity and bring in more players for an equal playing field,” Vásquez told the Wall Street Journal.
According to Vásquez, the bidding process for the new ports is expected to be completed by the end of 2025, with bids expected to come in from several other potential operators.
The winning bidders will acquire the rights to build the port facilities and get to operate them for 20 years.
Maersk’s APM Terminals and CMA CGM are both expected to make offers, according to the WSJ. Maersk already has a relationship with the canal, having bought the Panama Canal Railway Co. earlier this year. That railroad runs for nearly 48 miles along the waterway, moving containers between the Pacific and Atlantic Oceans.
CMA CGM had expressed interest in the Panama ports transaction when the 145-day exclusivity period expired, but the French ocean carrier has not entered into any direct discussions.
As for the plots of land now up for auction, Vásquez estimates that the concessions for the new port projects, when signed, would add approximately $500 million to the Panama Canal’s roughly $5 billion in annual revenue.
Cosco would be barred from participating in the bidding war since it is a Chinese government entity.
The shipping company’s entrance into any of the acquisitions is likely to cause more international tension, particularly among the Trump administration, which has sought to rid the Panama Canal and surrounding areas of any alleged Chinese influence.
President Donald Trump has publicly stated he wanted to “take back” the canal from the Panamanian government amid Washington’s national security concerns, and was a staunch supporter of the BlackRock-MSC ports acquisition when it first occurred in March.
In response to Trump’s rhetoric, the Panamanian government opened a three-month audit into CK Hutchison’s subsidiary Panama Ports Company, which owns and operates the Balboa and Cristóbal ports. That audit resulted in the government accusing Hutchison of breaching the previous 25-year contract by failing to share 10 percent of net income.
Multiple lawsuits have been filed over both the prior deal signed in 1997, and the current 25-year contract extension signed in 2021, with the comptroller general’s office filed suit with the country’s Supreme Court arguing that the agreement between Hutchison and the government is unconstitutional.
Panama’s President José Raul Mulino said after the lawsuits that he didn’t believe the Panama ports transaction would go through, “amended or not.” The U.S. later turned up the pressure when Ambassador to Panama Kevin Marino Cabrera called him Panama Ports Company “a bad operator.”
On the other end, China very much has stake in Cosco still being able to participate in the Hutchison deal, with the country reportedly threatening to block the ports sale unless Cosco was a part of it.
Cosco is reportedly seeking a stake of as much as 20 percent and 30 percent ownership of the ports, although the Financial Times has also speculated that under one option, the Chinese state-owned carrier would not acquire the two Panama ports.
