Source: Panama Canal Railway Company.
Container Traffic Handled by the Panama Canal Railway, 2001-2012 (in Units)
The initial Panama Railway was opened in 1855 as a venture to connect the shipping services of the Atlantic and Pacific oceans. However, with the construction of the Panama Canal, a new 47 miles (75 km) path for the railway was designed and began operations in 1912. When a highway across the isthmus was completed in 1943, railway traffic started to decline and the railway gradually went into disuse due to the lack of investment and maintenance. In 1977, after the Carter-Torrijos Treaty that started the retrocession process of the Panama Canal Zone to the Government of Panama, the railway was one of the first assets to be turned over. Up to the mid 1990s, the government of Panama provided limited maintenance to the railway. At that point, it was considered to have ceased to serve a relevant commercial function.
The setting of private port terminal concessions from 1995 and the introduction of post-panamax containerships led to a reconsideration of the commercial relevance of the railway. In 1998, a 50 years concession was secured by a joint venture between Kansas City Southern and Mi-Jack Products to offer both passenger and freight services. After some upgrade and the building of two new intermodal terminals in Balboa and Colon, the new Panama Canal Railway (PCR) was reopened in 2001. The railway became fully containerized and able to handle double-stack railcars and refrigerated containers. It provides a dedicated corridor for maritime shipping lines to reposition containers between the Atlantic/Caribbean to the Pacific ranges without transiting through the canal.
The growth of transshipment traffic at Panamanian ports underlined the relevance of establishing a rail service as a complement to the Panama Canal. This complementarity takes the form of a short haul landbridge for containers to reposition them between pendulum routes in the Atlantic and Pacific without the tolls and the potential delays of using the canal. For instance, the shipping line Maersk is a heavy user of the railway as a strategy to reposition containers between its Pacific and Atlantic / Caribbean routes. This is mainly because on the Pacific side Maersk is using post Panamax ships that could not enter the canal. PCR also offers the opportunity to reposition empty containers across the isthmus for transpacific backhauls. An important advantage for the railway is the possibility to move bounded containers between the Pacific and Caribbean ports without going through customs.
The 75 km trip between the Pacific and Atlantic intermodal terminals take about an hour and a half. PCR runs 10 trains daily in each direction carrying on average 100 containers, but has the capacity to run 32 trains a day. The railway has a design capacity of about 2 million containers per year. However, in its current stage the capacity is about 500,000 units per year, implying that it is currently operating at 75% of capacity. At such capacity levels, operations are starting to face hurdles, particularly if the traffic is not uniformly distributed in time. It underlines that the expansion of the Panama Canal railway is required to handle future growth in port volumes and their corresponding trans-isthmus repositioning of containers. There is also a challenge as an important rationale in using the PCR relates to the fact that post-Panamax ships are calling the port of Balboa and several containers are transshipped across the peninsula. With the expansion, such a transshipment function may no longer be required and places uncertainties about the future of the Panama Canal Railway.