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Container Shipping & Trade

Container Shipping & Trade

Panama Canal capitalises on container growth

Fri 10 May 2019 by Rebecca Moore

Panama Canal capitalises on container growth
Total loaded TEU has grown by 20% since the Panama Canal expanded its locks in 2016

The Panama Canal has won trade on the Asia-US route since its expansion. The Panama Canal Authority explains how it intends to grow this further

In the three years since the Panama Canal was widened, this transit has rapidly gained market share on the route from Asia-US West Coast, via the canal and US East Coast.

The container ship segment is one of the most important markets for the Panama Canal, accounting for 50% of its business. And several figures show the benefits reaped by widening the Panama Canal locks in June 2016, allowing larger neo-panamax vessels to transit the canal. Panama Canal Authority (ACP) senior international trade specialist Argelis Moreno de Ducreux told Container Shipping & Trade that the canal has 28 liner services transiting the canal weekly, covering trades between between Asia-US East Coast, West Coast South America-Europe, West Coast South America to the US and trade areas including the Caribbean and Oceania.

Ms de Ducreux adds “Since opening the widened canal locks in June 2016, we soon received bigger vessels. Of the liner services transiting today, 16 consist of neo-panamax vessels, while the remaining 12 consist of panamax-sized vessels. This is important, as the average vessel size has increased from 4,000 TEU to 7,314 TEU.”

Capacity has reached almost 10M TEU in a one-way direction.

Ms de Ducreux says “Compound average growth in the container segment since 2016 to 2018, on a fiscal basis from October to September, was 14% by capacity vessel size. Total TEU loaded has grown by 20% – before opening the new locks we had 12M TEU deployed and by the end of 2018 we had 16M TEU for combined two-way transit.”

Ms de Ducreux singled out the importance of the Asia-US East Coast route, which has capacity of 6M TEU through the Panama Canal one way. Indeed, this route has seen average vessel size increase to 8,900 TEU.

Ms de Ducreux says “We have seen double-digit growth in capacity since we opened the new locks due to the double or triple size of vessels transiting.”

The Asia-US East Coast route has seen a huge boost in capacity. Ms de Ducreux says “We have almost the same amount of services compared to before the locks were widened – 13 now compared to 12 then – but 12 of these are neo-panamax services.”

The largest vessel to pass on the Panama Canal Asia-US East Coast trade was 4,500 TEU versus the current biggest size of 14,863 TEU.

A crucial aspect to the Panama Canal being able to handle such large vessels is that ports on the US East Coast were prepared to handle larger vessels once the expanded locks opened.

Ms de Ducreux says “We have seen how ports have been investing in infrastructure and capacity to receive the neo-panamax vessels and this is also important for us. From 2018 we have seen a very interesting growth in volumes in terminals.”

Indeed, the Panama Canal has seen its market share of the Asia-US West Coast market increase since the locks were expanded, from 43% to 48%.

One challenge the Panama Canal might have to face on the Asia-US East Coast route is the impact of the US-China trade war. But so far there has been no major impact. Indeed, Ms de Ducreux explains “Last year when this began in June, we saw an increase in loaded containers to the US East Coast – a sign that shippers wanted to balance inventory levels in case the situation worsened.”

And she pointed out that between June and December 2018, volumes had continued to grow. But she warned “It may have an effect in the future – it depends on negotiations between the US and China.”

Looking ahead, the Panama Canal Authority expects a growth in vessel size and a positive impact from the 2020 low sulphur directive. Ms de Ducreux says “Next year we expect a growth in vessel size due to economies of scale. We expect to see average volume increases due to higher utilisation levels, although this does depend on the China and US negotiation. We expect more moderate growth in 2019 and 2020 than the previous years, but this is because the years before had double-digit growth. The economy is steady, and we predict a very positive year ahead.”

Singling out the start of the low sulphur directive in 2020 she says “We offer a big advantage as we have a shorter distance and therefore savings in bunker costs compared to longer routes such as via the Suez Canal and Cape of Good Hope. So, we expect more services to go backhaul through the Panama Canal.”

Indeed, many of the Panama Canal’s initiatives link into lowering emissions. In March this year it joined the Global Industry Alliance (GIA), a public-private partnership initiative of IMO under the framework of the Global Maritime Energy Efficiency Partnership Project, which is a Global Environment Facility-United Nations Development Programme-IMO project comprised of maritime industry leaders working to improve energy efficiency and reduce greenhouse gas (GHG) emissions in international shipping.

Panama Canal Administrator Jorge L Quijano says "Today's announcement marks a proud milestone for the Panama Canal and its long legacy as the green route of world maritime trade. Given our roots in sustainability and innovation, this partnership reaffirms the Canal's commitment to leading our industry to a cleaner and more efficient future."

Launched in June 2017, the GIA is a partnership of 18 maritime organisations working together to share their expertise and provide technical input towards implementing concrete activities that can support the shipping industry's transition to a low carbon future. The GIA members aim to do so by identifying and developing innovative solutions that address common barriers to the uptake and implementation of energy efficient technologies and operational measures.

The Panama Canal Authority said that its inclusion in the GIA falls in line with the waterway's almost 105-year history of environmental stewardship. Since opening in 1914, the Panama Canal's strategic geographic location has enabled vessels to shorten the distance and duration of their voyages compared to alternative routes, thus reducing costs and GHG emissions. In combination with introducing the expanded Panama Canal in 2016, which offers greater cargo carrying capacity and requires less cargo movements, the Panama Canal is estimated to have saved more than 750M tonnes of carbon dioxide emissions over the course of its history.

The Panama Canal has also launched its Green Connection Environmental Recognition Programme, which consists of the Green Connection Award, the Environmental Premium Ranking and the Emissions Calculator. Together, the three tools promote emissions reduction by recognising and incentivising vessels that comply with the highest environmental performance standards while helping others mitigate their own environmental footprints. The Emissions Calculator also helps the Panama Canal measure and reduce its own carbon footprint, operate more efficiently, develop a low carbon strategy and pursue a path towards becoming a carbon neutral entity.

Boosting value-add network

Alongside the boost in shipping business in the Panama region since the locks were widened, container ship services have also increased, offering ocean carriers a wider variety of add-on services.

For example, in April this year HullWiper launched its remotely operated vehicle cleaning services on the Atlantic side of the Panama Canal, in Balboa, with the Pacific side of the canal lined up for the future. It is a key location offering strong advantages for container ships. As the key transit point for vessels sailing between the Atlantic and Pacific Oceans, the Panama Canal is a main gateway to trade. “There is a prime bottleneck in Panama as there are a lot of ships waiting to transit the canal,” says HullWiper general manager Laurance Langdon. “We can clean them while they wait, day or night.”

Meanwhile GAC Group opened an office in Panama in May last year, providing a wide range of shipping services to vessels calling at Panamanian ports or transiting the Panama Canal. The Panama office will provide a suite of services including traditional ship agency, specialised husbandry, ship spares delivery, crew matters and repairs.

GAC Panama managing director Alexei Oduber says, “With the opening of the new locks we felt it was time for us to have an onsite solution – before we worked with an agent – and offer the customer a direct approach.”

Highlighting the value-add services that have grown alongside the widened locks, he says “The government is working jointly with the Panama Canal Authority and the private sector to develop and promote the value-add network. It is not just looking at containers but also looking at unloading and assembly. It allows shipping lines to take advantage of other opportunities, such as arranging for spare parts and new crew, and storing pallets of repeated business.” He says that such initiatives were creating a one-stop-shop for shipping lines and helping to create an efficient transit.

One service GAC offers that is particularly beneficial for container lines is forecasting for transiting the Panama Canal. Mr Oduber says “Forecasting of canal congestion is key, not just for today or tomorrow but liners plan six to eight months ahead for berthing windows. So, we sit down and look down the road six to eight months. We have a matrix of events, including queues of ships and scheduled maintenance, and weather plays an important part as there can be transit restrictions. We put all three together and forecast slot availability.”


Snapshot CV: Argelis Moreno de Ducreux (Panama Canal Authority)

Argelis Moreno de Ducreux is a senior specialist and leader of the liner services segment for the Panama Canal Authority. She is responsible for economic research, market analysis, competitive intelligence, demand forecasting and developing pricing strategies for the liner shipping segment of the Panama Canal.

Ms Ducreux holds a bachelor´s degree in economics from the University of Panama, and a master of business administration and marketing from Universidad Latina de Panama.

She participates as a speaker in local and international conferences, teaches at the International Maritime University of Panama, as well as other private universities in the Republic of Panama. She publishes papers in international professional forums such as the International Association of Maritime Economists and local and international journals. Currently, she is member of the board of directors of the Panamanian Association of Supply Chain Management Professionals.

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