The Panama Canal has entered into a new chapter in recent days with the opening of its long awaited third set of locks. The expansion project to achieve this almighty milestone has taken almost ten years and will allow significantly larger vessels to transit the Canal. Inevitably, it is expected that this will have a significant effect on global shipping markets. However, it’s expected that these effects will felt by some more than others!
The canal opened in 1914 and has become a key transit point between the Atlantic and Pacific Oceans. We note that nearly 14,000 transits of the canal were recorded during the last fiscal year, carrying approximately 230 million tonnes of cargo. According to Clarksons Research Services, this accounts for just 2% of total global seaborne trade. Whilst this may seem small, the canal is a key shipping lane for a number of vessel segments.
From a macro perspective the increasingly interconnected, globalised and consumer driven world we live in has brought about the dramatic upsizing of ships and thus there is a growing need for such vessels to cut their voyage times by transiting the Panama Canal. Indeed, as of 20th June 2016, more than 55% of total DWT capacity in the world fleet was accounted for by vessels too large to transit the canal. These facts alone are enough to see why the Panama Canal Authority embarked on this huge infrastructure project. The new larger locks will allow a higher number of vessels to transit, as the maximum beam has been raised to 49m, up from 32.3 m in the old locks, while the maximum LoA and draft will be 366m and 15.2m respectively. On this basis, 79% of the DWT tonnage in the world fleet will now be able to pass though the canal.
It is expected that the most significant sector to experience a positive impact will be the containers market, as well as LNG and LPG carriers. However, what impact will it have on the Specialised Products sector? Well the short answer is very little indeed!
Of the 3,038 IMO classed vessels trading in the Specialised Products fleet today, the largest that are regularly engaged in the chemicals business are 50,000 DWT Zinc coated sized vessels predominantly trading methanol. The maximum beam of such vessels is approximately 37m, with LoAs at around 190m and a draft of 13m. The point here is that any units in the Specialised Products sector that choose to use the Panama Canal will still be able to use the old locks, thus circumventing any potential congestion and delays at the new locks.
This is an important fact when one considers the estimated increase in US exports of chemicals from the US Gulf to the Far East. With a greater volume moved transpacific there will arguably be a higher number of transits through the Panama Canal. Any delays caused by congestion will obviously cause headaches for everyone. Panama based agents who are well versed in all things concerning the canal do not anticipate any more congestion than there is already with the incumbent two sets of locks. Of course, transit costs are also a factor here however to the best of our knowledge it seems the current tariff structure for the old locks will remain in place and be reviewed annually as before. Therefore as chemical tankers are unlikely to use the new locks, the new tariff structure in place here is not expected to have an impact.
At the end of the day, there will of course be some teething problems but as always the old adage of ‘Time is Money’ comes to mind. No matter which way look at it, ship owners and charterers alike will be looking to avoid any additional delays and the fact that the old locks can still be used is obviously a positive! Thus, we expect little notable impact of the expansions on the chemical tanker markets.