Archives for posts with tag: Neo-Panamaxes

It is over a year now since the opening of the new, expanded locks at the Panama Canal. The new locks have had a significant impact on a number of areas of shipping, including the gas carrier sector, but the main focus of the project in Panama was always the container trade, and the Asia-US East Coast route in particular. In that regard, how do things look a little over one year on?

Old For New

The new locks at the Panama Canal opened for transit on 26th June 2016, and the impact on the box shipping sector has been largely in line with expectations. The key area of impact was always going to be the Transpacific trade, and the Asia-US East Coast route in particular, the largest volume trade through the canal. Following the opening, the Asia-USEC route immediately saw swift upsizing of ‘Old Panamax’ containerships, being replaced by ‘Neo-Panamax’ units, with operators aiming to benefit from the economies of scale offered by running larger vessels through the canal. Regular deployment of ‘Old Panamaxes’ on the Asia-USEC route via the canal has fallen from 156 units in June 2016 to 30 today.

The total of ‘Old Panamaxes’ on the broader Transpacific trade now stands at 76, including some still operated via Suez to the USEC and from Asia to the USWC. However, there are around 35 ‘Old Panamaxes’ idle, and in total (based on a wide definition of 3,000+ TEU and ‘Old Panamax’ beam) 101 have been scrapped since start 2016. Having said all that, there are still many of these units deployed elsewhere, with, on the same definition, over 450 outside the Transpacific.

Bigging It Up

Looking upwards, the initial impact last summer was a speedy upsizing of tonnage to ‘Neo-Panamaxes’. This, as expected, basically jumped the class of sub-8,000 TEU ‘wide beam’ ships; just 22 of those serve Asia-USEC today. Instead it focussed immediately on the 8-11,999 TEU ships, and today there are 93 of those deployed on the Asia-USEC. And now even units as large as 12,000+ TEU are getting in on the act, with 9 deployed Asia-USEC, taking total deployment of new ‘wider beam’ units there to 124.

Switching Off?

This is all against a backdrop of robust growth on the Transpacific, with peak leg eastbound trade up by 8% y-o-y in Jan-May 2017. However, there hasn’t been any early sign of ‘cargo switching’ with flows proving ‘sticky’, even if USEC infrastructure constraints are diminishing (lifts at the 5 leading USEC ports as a share of lifts at the 5 major USWC ports is steady at c.80%). And interestingly the additional capacity on the Asia-USEC trade from the surge in upsizing has eroded the average Asia-USEC/Asia-USWC spot box freight rate ‘premium’ only gently, from 94% in 1H 2016 to 76% in 1H 2017.

More Time Required?

So, plenty of questions remain. Will the Panamaxes finally fully depart the trade? Will a ‘cargo switch’ eventually evolve? How will the freight market trend? One year may have passed but it appears more time is needed to assess in full the longer-term impact of the new Panama locks on box shipping. Have a nice day.

Graph of the week

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Last week’s Analysis examined the key impacts of the opening of the new locks at the Panama Canal across a range of shipping sectors. This week, with the new locks up and running for commercial business, the focus falls on the containership sector, with the capability to allow the transit of larger boxships one of the key aims of the canal expansion project.

Wide Boys Welcome!

At the ‘old’ locks, containerships accounted for a large share of the transits, and an even larger share of the overall toll revenue on the back of high value box cargo transits most notably from Asia to the US East Coast. Based on the official ‘New Panamax’ dimensions, the new locks will allow containerships of up to around 13,500 TEU (dependent on the precise design) to transit. Only 207 boxships in today’s fleet will be too large to pass through. The amount of TEU capacity able to pass through the canal will rise from 37% to 85% of the fleet.

Bigger And Better?

Subsequently, a key impact on container shipping is the potential for upsizing of ships operating on the Asia-USEC trade. It looks likely that operators will upsize from ‘old Panamaxes’ initially to units around or above 8,000 TEU, with a number of carriers having already put new service plans in place. Even larger ships may eventually follow when port and infrastructure projects on the USEC are completed. Whether that is then followed by ‘cargo switching’ from Asia-USWC-‘landbridge’ to Asia-USEC ‘all water’ services on the basis of lower seaborne unit costs for now remains to be seen.

Another impact is on the structure of the containership sector. A new, more appropriate segmentation is needed. Along with the new vessel indicators and profiling described last week, Clarksons Research data will also provide fresh segmentation of the containership fleet from July onwards (see graph) to provide the most market-relevant statistics.

Splitting Up The Big Boys

The sector now looks different with new segments clear. The 8-11,999 TEU sector will comprise the initial wave of ‘Neo-Panamaxes’. The 12-14,999 TEU sector contains the larger ‘Neo-Panamaxes’ of the future. Today 59 ships in the 12-14,999 TEU sector can transit the new locks on the basis of the official dimensions, another 39 have dimensions so close to the limits one would imagine they are likely to transit, and a further 50 will probably fit through on the basis of the already mooted expansion of the beam restriction to 51m. There are a further 43 ships closely related in design terms to those detailed above, but above 15,000 TEU there is a clear step up to much longer and beamier designs. Deeper levels of segmentation will continue to track the decline in the ‘old Panamax’ sector.

Big News Is Old News?

So the opening of the new locks in Panama is big news for bigger boxships. Market watchers will have to keep a keen eye on the impact, and also get used to a new perspective on the market structure and data. But in a sector where there’s been so much upsizing in recent years anyway, perhaps that’s not such a new thing after all? Have a nice day.

SIW1228