Panama cancels China-linked port deal, hands canal terminals to Maersk, MSC

Panama canceled key port contracts held by a subsidiary of Hong Kong-based CK Hutchison, handing temporary operations of the ports to Danish shipping giants AP Moller-Maersk and Switzerland-based Mediterranean Shipping Co., its official gazette said on Monday.

The declaration formalized last month’s Supreme Court ruling that concessions to the Balboa and Cristobal terminals near the Panama Canal, which the Panama Ports Company (PPC), a subsidiary of CK Hutchison, had held for more than two decades, were unconstitutional.

The Panamanian government on Monday officially took control of port facilities, including cranes, vehicles, computer systems and software, under a decree aimed at ensuring uninterrupted operations until a new concession is granted within 18 months.

Under the interim arrangement, APM Terminals, a unit of Maersk, will operate the port of Balboa on the Pacific side of the canal, while MSC’s port operating subsidiary Terminal Investment will operate the port of Cristobal on the Atlantic side.

shares C.K. Hutchison It fell 0.9% at the open on Tuesday. The stock is up over 20% so far this year.

In a statement to CNBC on Tuesday, CK Hutchison said PPC had halted all operations at terminals on both sides of the canal on Monday, calling the decree “illegal.”

The Hong Kong conglomerate said it would continue to consult legal advisors on the decision and acquisition.

CNBC reached out to Maersk and MSC for comment but did not receive a response via broadcast.

The simmering dispute has become a geopolitical flashpoint between Washington and Beijing, with Panama caught in the crossfire.

CK Hutchison negotiated a $23 billion deal to sell port assets outside China with a BlackRock-led consortium after US President Donald Trump claimed last year that China was “operating the Panama Canal”. Beijing quickly intervened, defining the sale as follows: “submission” This led to American pressure and a halt to the transaction.

The Hong Kong conglomerate has backtracked since last month’s ruling and launched arbitration proceedings against Panama. On February 12, CK Hutchison said “any steps” taken by Maersk or its subsidiary to operate ports without its approval would likely “result in legal recourse”.

Beijing also warned that the Central American country would “pay a heavy price, both politically and economically” if it did not change course.

The Panama court decision was seen as a major victory for the United States, given that the White House has made curbing China’s influence on the global trade artery one of its top priorities.

there is china reportedly directed The government urged companies to halt talks about new projects in Panama and urged shipping companies to consider rerouting their cargo through other ports, Bloomberg reported last week.

— CNBC’s Emily Chan contributed to this story.