Panama Canal Expansion May Worsen Panamax Surplus: Analyst

Posted by George Backwell
Tuesday, April 29, 2014
Image courtesy of Drewry Maritime Research

The continuous cascading of surplus Panamax vessels into North-South trades is still contributing to over-capacity, and the problem is likely to get worse when the Panama Canal’s widened locks are opened at the end of 2015, according to the latest edition of Drewry Container Insight.

MSC’s recently announced service between Asia and West Africa deploying 10 ships averaging 4,000 teu underlines a growing difficulty for North-South trades. Surplus Panamax vessels between 4,000 teu and 4,999 teu are still keeping charter rates low, making it easier for competing carriers to penetrate the markets more deeply, regardless of need.

Only four of the ships deployed in MSC’s Africa Express service have so far been identified, but as they are all chartered, the inference is that this is one of the drivers behind it.

If so, others are likely to follow, and the problem will increase dramatically once the Panama Canal’s enlarged locks are opened at the end of 2015, when many more Panamax vessels will become surplus to requirements.

In this respect, the progressively delayed expansion of the Panama Canal – from mid-2014 to end 2015 – has given North-South routes a welcome reprieve, even though it has cost Panama Canal users dearly.  At present, around 150 vessels between 4,000-5,000 teu still use the canal between Asia and East Coast of North America alone, and another 58 are deployed in services between Europe/West Coast of South America, and between East Coast of North America/West Coast of South America, many of which need to be replaced by larger vessels.

Ocean carriers desperately need more economies of scale than are available with Panamax ships to turn losses into profit, as evidenced by Evergreen’s decision last month to route more cargo from Asia to the USEC via Suez instead of Panama.

Another 377 vessels between 4,000 teu and 4,900 teu are currently employed on routes not passing through the Panama Canal, or laid up, so the transfer of just a small proportion of the remaining 258 vessels currently using the Canal would cause a shock to the system

Some of the surplus will be scrapped, and ocean carriers clearly see this as part of the solution. Nineteen vessels between 4,000 teu and 5,000 teu were already scrapped in the first three months of this year, compared to just seven over the whole of 2013, and one at the very end of 2012.

The problem here is that the average age of ships in the sector is only 8.5 years, with 73% of them being less than 11 years old (see Table 1). As many of ships will be depreciated over 15 to 20 years, this means that much book value will have to be destroyed, which many shareholders will find hard to accept. Some owners will be looking to re-engine the youngest vessels, therefore, or even jumboize them.

Total vessel capacity of the Panamax sector is 2.8 million teu, 16% of the total cellular container vessel fleet. If half of this capacity were to be scrapped after the Panama Canal is widened, the current over-capacity would disappear.

In the meantime, more will be laid up unless alternative deployment can be found. Thirty four vessels between 4,000 teu and 4,999 teu were inactive in the middle of April, compared to 40 at the beginning of the year.

Drewry's view
The opening of the Panama Canal’s enlarged locks at the end of 2015 is likely to lead to a massive surplus of Panamax container vessels between 4,000 teu and 4,999 teu, many of which will have to be scrapped regardless of age. It will also be further bad news for North-South trades not using the Canal.
 

Source: Drewry Maritime Research: 'Container Insight'

 

 

Maritime Reporter June 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Bollinger Fourchon: 13 Years Without a Lost Time Accident

Bollinger Shipyards, Inc. announced that their Bollinger Fourchon, L.L.C. facility has worked 13 years without a lost time accident. Building on a philosophy that starts at the top,

Messer's CEO Norville Announces Retirement

Bill Heller to assume the position as Messer Cuttings Systems’ President and CEO Gary Norville started at Messer Cuttings Systems Inc. in September 1980 selling and installing cutting machines.

Rohr Dredge Continues European Expansion

Rohr International Dredge Holdings, Inc. announced that it acquired Eurl Rohr France, including its current backlog, inventory and all associated intellectual property (IPR), on July 23, 2014.

Contracts

General Dynamics gets $25 mi GPS Contract from Lockheed Martin

General Dynamics Advanced Information Systems, a business unit of General Dynamics, was awarded a $25.4 million full-production contract from Lockheed Martin to support the U.

Globecomm to Provide VSAT for PBJV Barge

Purpose-built accommodation and pipe-lay barge on charter to Petronas equipped with VSAT and L-Band services. Globecomm Maritime has been awarded a contract

VSTEP Wins Mexican Navy Simulator Contract

The Mexican Navy selected VSTEP to supply a Class A NAUTIS Full Mission Bridge (FMB) Simulator and 24 NAUTIS desktop trainer stations for the Naval Academy in Veracruz.

Finance

Iraq's Kurds Have Right to Sell Oil While Squeezed by Baghdad

Iraq's Kurdish region has the right to keep selling oil as long as the Baghdad government keeps cutting its budget, the head of the Kurdish parliament's energy committee said on Tuesday,

Petroecuador Tenders to Buy 3.84m bbls of Naphtha

State-run oil company Petroecuador has launched tenders to buy a total volume of 3.84 million barrels of naphtha for delivery in the coming month at Esmeraldas,

Company Fined for Oil Spill Near Anacortes

Ecology issues $112,500 penalty for sunken vessel.   American Gold Seafoods faces a $112,500 penalty for an oil spill caused by the accidental sinking of its vessel,

Container Ships

XtendFRESH Now Available from Carrier Transicold

The XtendFRESH atmosphere control system, which preserves quality and extends shipping distances for perishables shipped in refrigerated containers, is now available from Carrier Transicold.

Diana Containerships Q2 & 1H 2014 Financial Results

Greece-based Diana Containerships Inc., a global shipping company specializing in the ownership of containerships, has reported net income of $0.6 million for the second quarter of 2014,

Danaos Corporation 2Q and 1H 2014 Results

Danaos Corporation ("Danaos") (NYSE: DAC), a leading international owner of containerships, today reported unaudited results for the period ended June 30, 2014.

Logistics

Iraq's Kurds Have Right to Sell Oil While Squeezed by Baghdad

Iraq's Kurdish region has the right to keep selling oil as long as the Baghdad government keeps cutting its budget, the head of the Kurdish parliament's energy committee said on Tuesday,

Diana Containerships Q2 & 1H 2014 Financial Results

Greece-based Diana Containerships Inc., a global shipping company specializing in the ownership of containerships, has reported net income of $0.6 million for the second quarter of 2014,

Mercator Lines Profit Hit by Low Bulk Freight Rate

Mercator Lines (Singapore) reported a revenue of US$ 16.5 million for Q1 2015, an increase of 19% as compared to correspoding period in the previous previous year, however a net loss of US$ 7.

Consulting

Location of New Port Expansion Projects: Analysis

When it comes to port development, many governments now favour letting the market decide where expansion should take place, whereas most other transport infrastructure,

Europe Sleep Walking into an Energy Crisis: Analyst

The downing of flight MA17 has prompted calls for further sanctions on Russia targeted at its energy sector. Douglas-Westwood in its 'DW Monday' analysis considers

Nigerian Piracy Threatens UK Interests: New Report

The UK economy is heavily exposed to lawlessness off the coast of Nigeria, a new report published today by the UK Chamber of Shipping says. The report found that almost all of the UK’s annual £6.

 
 
Maritime Careers / Shipboard Positions Naval Architecture Navigation Pipelines Port Authority Ship Electronics Ship Simulators Shipbuilding / Vessel Construction Sonar Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1899 sec (5 req/sec)