Drewry: Panama Canal toll cuts will take time to lure backhauls

Drewry: Panama Canal toll cuts will take time to lure backhauls

At nearly 15,000 TEU, the CMA CGM Theodore Roosevelt is the largest ship to pass through the Panama Canal to date.

The reduction in Panama Canal tolls will attract larger ships and boost revenue, but it is unlikely to immediately lure back Asia-East Coast North America backhaul services transiting the Suez Canal, according to Drewry Shipping Consultants.

The $10 to $15 per TEU tariff cut on southbound sailings that comes into effect on Oct. 1 applies to vessels of 6,000 TEU and above, which must have carried at least 70 percent of their capacity on the northbound leg and not take longer than 28 days between the two journeys through the waterway.

“The savings available to carriers will increase according to the size of ship deployed, but they might not be sufficiently attractive to immediately change carriers’ routing plans,” London-based Drewry said.

Based on the eight services that currently transit the Canal in both directions with an average ship size of 6,900 TEU, the round voyage saving will be “only” $30,000, and for the 80 vessels that will qualify, the total annual discount will amount to almost $13 million if they each make about five round-voyage transits each year.

While this is a “good sum,” the rival Suez Canal has just extended to the end of the year its “generous” toll rebates of between 45 to 65 percent depending on the direction and port coverage of the services.

If the rebates are repeated next year, the Panama Canal’s discount is unlikely to lure many carriers from the Egyptian waterway, according to Drewry.

Only eight of the 14 headhaul services from Asia to the East Coast of North America that transit the Panama Canal make the same journey on the return leg — three completely avoid any canal tolls by sailing via the Cape of Good Hope, while three transit the Suez Canal.

While the Panama Canal has the same number of weekly loops as it did before its expansion, the number of Suez-routed services has declined from nine to five.

“We do not expect to see much, if any, change to carriers’ routing plans this year,” Drewry said.

However, “that could change in 2018 if the Suez Canal ends its rebate scheme, in which case Panama’s return leg discounts will provide a more compelling argument to switch.”

The upgrade in the size of ships on the Asia to East Coast North America route transiting the Panama Canal has surged by 60 percent since May 2016 from 4,900 TEU to 7,900 TEU in July 2017, just overtaking the size of vessels on the trade that sail through the Suez Canal.

The Panama Canal this week handled its first ultra-large container vessel, the 14,855-TEU CMA CGM Theodore Roosevelt, which was on route from Asia to the US East Coast.

Contact Bruce Barnard at brucebarnard47@hotmail.com.