New Panama Canal isn’t expected to attract more tankers than current 5% share
The new enlarged Panama Canal isn’t expected to be a major gamechanger for tanker traffic. In its latest weekly report, shipbroker Gibson noted that “historically, only about 5% of all traffic transiting the canal are tankers and we do not anticipate this figure to change significantly, once the enlarged waterway is fully operational. The maximum width of the new locks (49 meters) prohibits any tanker larger than a Suezmax from being physically able to transit. Furthermore, a Suezmax can only transit with a reduced draft. The economics of taking a part loaded Suezmax through the canal to discharge in the Far-East will make most moves along this route arbitrage driven, given the distance and the transit fees. The impact of the removal of the US ban on crude exports may well be minimal in the short term as we do not envisage any significant increases in crude exports while domestic production is falling”, said Gibson.
The London-based shipbroker added that “however, we could witness some crude movements from the US Gulf to the Far-East. The current low pricing of bunker fuel will also influence the decision whether to pay canal fees or sail via the Cape. US Gulf refiners may appear to benefit from the option to ship LR2 parcels to the West coast of Latin America via the canal, however port infrastructure is likely to see MRs remain the dominant players in the region. Similarly, the Jones Act will continue to limit product movements from the US Gulf to US West Coast. The enlarged Panama Canal from the outset was primarily designed for the container, car carrier and VLGC markets, as well as possibilities for LNG. The Panama Canal Authority has faced many challenges since embarking on this project in 2007 and undoubtedly, the hard earned expansion will make a notable impact on a number of shipping trades. However, the tanker market is unlikely to be one of those”.
It’s worth noting that “the new enlarged Panama Canal locks will open their gates to the first toll paying vessels on 26th June, twenty months behind the original scheduled completion date. The initial target date for a bigger canal was October 2014, to coincide with the 100th anniversary of the opening of the original canal. However, the project has been beset by several obstacles, including a contractual dispute between the Panama Canal Authority (ACP) and Grupo Unidos, the consortium responsible for the construction. A series of strikes by consortium workers and a national strike in Panama caused further delays and yet more cost overruns. Finally, in August 2015, water came streaming through cracked concrete in the new Cocoli lock at the Pacific end during stress testing, which the ACP finally admitted would cause a further delay. The original cost of the expansion was $5.25 billion, but all of the above could push the final total to nearer $7 billion. To add to ACP problems, the new canal opening will coincide with depressed freight markets, particularly for the liner trades, the intended market for the enlarged canal as well as increased competition from the Suez Canal. One piece of good news for the ACP is that the draught restrictions caused by the El Nino effect, which had threatened the opening, have ended following sufficient rainfall over recent days”, Gibson concluded.
Meanwhile, in the crude tanker market this week, in the Middle East, Gibson noted that “the potential disruptive element of the meetings/parties in Posidonia this week didn’t seem to put off Charterers from finalising their June VLCC programme. Owners were able to secure a slight premium over levels earlier in the week, but with the carry over of tonnage for the next month seemingly in good supply we can expect to see some incentives from Owners being shown. Currently levels for East are around ws 62.5 on 270,000 mt and for West at ws 35 on 280,000mt. Suezmax rates have remained steady this week as the end June cargoes have been worked which currently stand at around ws 80 for East and ws 45 for Western destinations. We are still awaiting the July Basrah program to be published to see if it will favour Suezmax or VLCC tonnage. A flurry of Aframax activity in the far east recently has seen a cut in the supply of ballasters to the AG, accentuating what was already a tightening tonnage list. While we have not seen rates move as much as we might expect as a result, this can be attributed to a lack of any real activity as the market slowed down for Posidonia week. Rates currently stand from the AG at 80,000mt x ws 92.5 and from Singapore 80,000mt x ws 95”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide