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| Economy |
| Canals Feel Ripples of Container Shipping Crisis |
| 2016-02-28 |
| By Gavin van Marle (The Loadstar) – The Panama and Suez canals could be the next institutions to be affected by the ongoing crisis in the container shipping industry, according to new analysis from Africa ports analyst and monitoring service portoverview.com The twin factors of cellular overcapacity and rock-bottom bunker costs have, over the past year, led carriers to divert multiple sailings away from the world’s two principal trade arteries and reroute vessels around the southern African cape. Its six-month report for the second half of 2015 quoted analysis from SeaIntel (portoverviw.com co-owner), which showed that since the end of October 2015, 115 vessels deployed on Asia-USEC and Asia-North Europe services have made the back-haul trip to Asia by sailing round the Cape of Good Hope rather than through the canals despite using them on the headhaul legs. Three of these vessels were deployed on Asia-North Europe services, while the remaining 112 were returning to Asia from the US east coast. “Normally, 78 of those voyages would have gone through the Suez Canal, and as 53 of the voyages were in 2015, it would have meant that the number of container vessel passing the Suez Canal in 2015 would ‘only’ have decreased by 1.9% year-on-year, instead of the reported 2.8%. The other 37 vessels would normally have passed through the Panama Canal,” portoverview.com said. “SeaIntel concludes that both the canals face a significant challenge in the current low bunker price, as it means that for many services it is cheaper to sail south of Africa on the backhaul than to use the canal routings,” it added. “The canals have a particular disadvantage in regard to the USEC-Asia services, where it is currently economically viable for 14 out of 22 services to sail south of Africa on the backhaul, and it would probably be viable for almost all of them if intermediate port calls were dropped.” It is even viable for sailings from North Europe to Asia to route via South Africa, “if the intermediate calls were dropped or switched to other services”, it said. “Currently, the carriers are only using the south of Africa routing on the backhaul legs and retaining the transit time, but considering the financial situation of most carriers, and keeping in mind the relative ‘ease’ with which the carriers implemented both slow-steaming and super slow-steaming, going south of Africa on the head-haul is going to look very alluring for some carriers, if indeed they can re-route the cargo from the intermediate port calls.” There is a further, compelling, reason for carriers to route via South Africa: in addition to avoiding canal transit fees, the elongated sailing route, which adds another week to transit times, could potentially “soak up” between 60-80 vessels, of which half would be ultra-large container vessels, and take out some of the industry overcapacity which is causing freight rate volatility. The Loadstar is fast becoming known at the highest levels of logistics and supply chain management as one of the best sources of influential analysis and commentary. Check them out at TheLoadstar.co.uk, or find them on Facebook and Twitter. |
| Posted by:badanov |
| #11 Hello, Joe in Guam. I have thought of that idea but the length and the topo would make it cost prohibitive. Instead of a wall one could build a moat, heh, with Mexico. |
| Posted by: Alaska Paul 2016-02-28 21:14 |
| #10 Sniff, sniff, IS THERE NO LOVE FOR THE NICARAGUA CANAL, THE ONE AFGAIK THAT CONTRACTOR CHINA HAS YET TO START BUILDING??? Iff-n-when Beijing does start contruction of same, IMO 'tis all the more reason again for the US to dredge to RIO GRANDE from TX side to Baja, CA or Baja Peninsula-Sea. |
| Posted by: JosephMendiola 2016-02-28 20:48 |
| #9 You're right Snowy. Calculating costs is a complicated affair. It is a big equation that both sides (canals and ship owners) play to maximize profits. A miscalculation on the part of a canal will lose traffic even though it costs the ship owners more time. With the Baltic dry index so low, ship profits are really squeezed. |
| Posted by: Alaska Paul 2016-02-28 17:27 |
| #8 AP: a standard shipping container can carry about 50,000/pounds of material. Retail, coffee costs about 8.00 a pound. I don't have a bag handy, I will estimate the dimensions as about 3" x 5" x 10", or 150 cubic inches. The standard TEU has a weight capacity of about 47,600 (I forgot about the container itself), and a cubic capacity of 1360 cubic feet. So if my guesstimate is right, I wind up with (/ (* 1360 12 12 12) 150.0) which evaluates to 15667.2 pounds, which retails for $ 125,000, of which the 82.00 fee per TEU is .06 %, or .0006. Assuming, of course, you're shipping the coffee in vacuum packed bags in a TEU. |
| Posted by: Thing From Snowy Mountain 2016-02-28 16:23 |
| #7 2013 information about transiting the Panama Canal I found on the web. "Cargo ships are billed $82 per full container, $74 for an empty one. (So you really don’t want to have a lot of empties.) Then in a system that seems like it was copied from U.S. airlines, there are lots of extra fees on top of that. The ship passing by in the photo above was loaded with 3,800 containers, so here’s what the captain paid: – $321,446 for the containers – $11,445 for the work of 7 tugboats – $4,745 for ground assistants – $3,600 for ground wires When they exit the other side of the canal, that transit alone will have added 1/3 of a $million to the cost of the goods on the ship. So if you’re in Boston getting coffee from Sumatra or a car from Korea, keep this in mind when you look at the price." LINK |
| Posted by: Alaska Paul 2016-02-28 14:52 |
#6 Here is a screen shot of the Panama Canal traffic I took on February 11 using the MarineTraffic app. The ship icons are ones moving and the diamonds are anchored ships. Backlog for transit at that time was at least one week, unless one was willing to pay higher transit fees to cut in line.  The new locks that will double traffic were scheduled to be opened in April, but are not to be opened to June, due to cold concrete joints and major water leaks on the base of one of the new locks. I wonder how the upgrades in both the Suez and Panama Canals will be utilized when the canal authorities raise their transit fees to what they think that the market will bear. Shades of Nassar. |
| Posted by: Alaska Paul 2016-02-28 14:12 |
| #5 The rates Panama will charge on very large container ships will be $450k for a transit through the canal. This will be a major influence on whether the ship goes through the canal or around the Cape of Good Hope; even when bunker fuel prices rise back up. |
| Posted by: Alaska Paul 2016-02-28 13:51 |
| #4 I remember whe Flight Sim 10 came out, you could see the New excavation of the big new locks. Started by ' mericans of course in 1939. Excavation mostly complete, built to allow (in theory) The passage of the then planned Montana Class BBz. Coral Sea and Midway could have made passage as well, but they were unknown and unplanned. We are fast approaching the 74th Anniversary of the carrier engagements at Coral Sea and Midway. Dawg bless you Wade McClusky where-ever you are. |
| Posted by: Shipman 2016-02-28 11:14 |
| #3 Item 1: During the time frame in question, both canals were undergoing expansion projects that created delays. Item 2: Earlier this month the Panama Canal experienced a traffic jam of epic proportions. Almost a week with over 100 vessels waiting for transit at any one time. Go read GCaptain for info on commercial shipping. |
| Posted by: ed in texas 2016-02-28 09:31 |
| #2 interesting. probably temporary, given the factors described. but still interesting. |
| Posted by: Nguard 2016-02-28 00:45 |
| #1 Gee Jimmy, maybe they'll give the canal back! |
| Posted by: Skidmark 2016-02-28 00:43 |