Expanded Panama Canal’s lackluster performance, yet to fulfill transit goals
The expanded Panama Canal which was opened less than a year ago remains largely unutilised even though a significant amount of traffic is available. The Panama Canal Authority has created a number of slots for a total 12 transits per day for container vessels.
According to Matthias Dietrich, Hamburg Süd’s Senior Vice President for the Caribbean and Latin America West Coast region said, “Only less than a third of that is being used at present, Bookings for the Neo-Panamax [up to 14,000 TEU] vessels have been slow to come – last month, there were a few days which saw four vessel transits, but on most days it has been two or three transits”. He continued, “There is still a lot of room”.
The larger locks have led to Panama winning back considerable volumes from Suez – especially in respect of its role as a key artery on the Asia-US East Coast trade – this has failed to translate into more vessel transits, as the larger dimensions allow more cargo to be carried on fewer ships.
Hernan Salazar, MSC’s West Coast South America planning manager told delegates that prior to the expansion, there were 16 weekly service strings through the Panama Canal, which has subsequently been reduced to 13.
MSC itself has reduced the number of its vessels transiting the waterway from 18 per week to nine, while the average size of vessels transiting the waterway, previously 4,600 TEU (effectively the Panamax limits) has now increased to 6,400 TEU.
He said, “And that will continue to increase – there has been a 13% increase in capacity altogether on services through Panama – there is a lot of room for more. This time last year the waterway connecting the Indian Ocean and the Mediterranean Sea saw 52% of the traffic between Asia and the US East Coast, with Panama controlling the remaining 48%. Today, Suez has a 43% market share and Panama 57%.” He further added, “After the new locks Panama was able to offer carriers the same economies of scale and it is a much shorter route”.
Consequently, Suez has dispensed rebates to try and lure some lost business back – as much as 60% according to Rodolfo Sabonge, Vice President of Research and Graduate Studies at Panama Maritime International University.
The primary target of that pricing policy was to backhaul traffic returning to Asia via South Africa under extreme slow steaming, but Mr. Salazar had warned the Panama Canal Authority that it would also need to develop some strategy in response.
Mr. Dietrich warned that the prospect of Panama seeing large chunks of new business coming through its most important national asset in the short term was unlikely, especially while demand for container transport remains so muted.
He said, “There’s some reshuffling of service patterns possibly still to take place, but the main Asia-US East Coast, South America West Coast-Europe and Asia-South America East Coast services will likely remain as they are. There is a theoretical opportunity for vessel upsizing on the route from Asia to northern Brazil, but that is unlikely while the ports of Northern Brazil are not able to handle ships of that size – so it won’t happen anytime soon”.
Nonetheless, over the medium term, traffic could well see a substantial increase if US shippers in the middle and eastern parts of the country decide to reshape their container supply chains from Asia.
In that context, US Federal Maritime Commission Chairman Mario Cordero told delegates that the expansion represented a fundamental change in trade patterns.
However, Mr. Sabonge claimed it was still early days in terms of the relatively low level of neo-Panamax bookings.
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Source: The Loadstar