After a combined 265 years in operation, the domination of the two great artificial waterways – the Panama and Suez canals – in global trade is under threat from alternative routes for shipping. One is via an even more ambitious constructed canal that would blindside US President Donald Trump’s plan to take over the Panama Canal, while the others are open sea routes and “land bridges” that link ports with rail.
But first, what’s wrong with the original waterways – global trade’s historic “choke points”?
In the case of Panama, the canal is not wide or deep enough to take the new giant container ships that currently have to sail all the way around the Cape of Good Hope. Last year’s El Niño-triggered drought also slashed transits and left doubts about the canal’s long-term viability, despite plans to build a reservoir that would keep the locks topped up.
As for the Suez, it remains highly volatile, despite Trump declaring an end to the Houthi’s missile attacks.
For these reasons, the gigantic “Nicaragua Canal” project has come back into the frame. The latest proposal is for a US$50 billion, 278-kilometre waterway – nearly three and a half times longer than the Panama Canal – that would link the Pacific and Atlantic coasts and shorten by 900 kilometres the route through Panama. There would be more than enough room for the new generation of giant box ships able to carry 24,000 twenty-foot equivalent units of cargo.
Meanwhile, Russia’s nuclear-powered icebreakers are opening the Northern Sea Route that passes through the Arctic along the Russian coast.
First proposed nearly 500 years ago, the enormous scheme in Nicaragua routinely attracts interest. A Chinese communications tycoon undertook a symbolic groundbreaking on a version of the project a decade ago, only to make no real progress before abandoning the idea. But in late 2024, Nicaragua’s president Daniel Ortega invited Chinese – but not American interest – at a summit in the country’s capital of Managua.
China may now be more willing to foot the bill in Nicaragua. Under pressure from Washington, the Panamanian government has promised to end its embrace of Belt and Road in 2026, while Hong Kong-based ports giant CK Hutchison has just sold to a BlackRock-led consortium for $22.8 billion its 90 per cent interest in the ports of Balboa and Cristobal at opposite ends of the canal. Thus, China’s ambitions in Panama are blocked.
As volumes of cargo grow inexorably, alternative corridors like land bridges or “dry canals” become more viable. Although they can’t carry the same volumes as waterways, they are cheaper and faster to build, generally taking five years instead of 10-15 years for a transoceanic canal.
Of these, Mexico’s 303-kilometre Tehuantepec Interoceanic Corridor could be first off the blocks. It was previous president Manuel Lopez Obrador who revived the idea in 2023, declaring that “Panama is saturated”. The $4.35 billion scheme would connect the two oceans with airports, warehousing, industrial parks and other infrastructure located along the track. For his part, Ricaute Vasquez, administrator of the Panama Canal, believes the “Mexican option could be a potential threat”.
According to a review in trade publication Port Economics, Management and Policy, “every Central American country with access to both the Caribbean and the Pacific has dry canal projects in various phases of planning or development”.
That leaves the sea routes. Russia’s nuclear-powered icebreakers are opening the Northern Sea Route that passes through the Arctic along the Russian coast. At 12,800 kilometres, it’s a 40 per cent shorter voyage between Europe and Asia than through the Suez Canal and, in favourable conditions, 10 to 15 days faster. “Russia’s fleet of nuclear icebreakers is accelerating the route’s evolution into a full-fledged transport highway”, explains Arctic Review, the publication of the Arctic Council.
Russian President Vladimir Putin’s ambition is for year-round voyages as soon as 2030. “Melting sea ice is both lengthening the shipping and navigation seasons and facilitating use of the Northern Sea Route by larger and more diverse vessels capable of travelling without icebreaker accompaniment,” notes Arctic Review. Russia has also budgeted $215 billion for rail corridors into its Arctic regions.
The other Arctic route is the Northwest Passage, for North Pacific to the North Atlantic Ocean. There are historic sovereignty issues – Trump has laid a claim but Canada and Denmark stand in the way. But the potential is there, even if both the Northern Sea Route and the Northwest Passage depend on a warming climate.
