What Will be the Impact when the Newly Extended Panama Canal Locks Open?


What will be the impact on shipping when the newly extended Panama Canal open today (26th June 2016)? Figure one below shows the physical changes to the dimensions of the old and new locks on the Panama Canal (time lapse video of the construction).

Fig 1 New Panama Canal Dimensions
Under the old dimensions, the widest containership that could pass through the Canal was one with a beam of 33m – Panamax (3,000 to 5,999 TEU). The ships are pulled through the old locks by “donkeys”, which are small gauge locomotives, and often a sea cadet on his first passage would be given a bucket of water and told to water the donkeys. Interestingly, there has not been any clear indication from the Panama Canal Authourity if the old locks will continue to be operated in parallel with the new locks. These old Panamax containerships make up around 16% of the current capacity of the containership fleet.

Fig 2 New and Old Panamax Containerships
As trade increased, and due to changes in trade routes, containerships wider than 33m were built. In theory, these older Post-Panamax containership (3,000 to 9,999 TEU – see figure 2) will be able to use the new locks, too. These currently make up 22% of the fleet.

The New Panamax (10,000 to 13,399 TEU) containership, also known as Neo-Panamax, currently makes up 18% of fleet by capacity, according to mapping, ship search and valuation provider, VaesselsValue, but it is expected that this sector will replace the old Post-Panamax.

It is expected that the old Panamax containerships will cascade downwards into the other sectors, and may even “interfere” with the Feedership trades (1,100 TEU), should the rates decline to comparable levels. This will most likely decrease the values of old Panamax vessels, and may lead to a new round of sales for scrapping.

Fig 3 Seatime Savings

The increase in capacity able to pass through the new locks and the sea-time savings (see figure three) for the larger ships will be significant, but the impact is hard to assess until the liners start using the new locks.

The top five New Pananax containership owners are shown below (figure 4).

Fig 4 New Panamax Owners

According to some studies, the opening of the new locks could double the volume of total trade (tankers, dry bulk carriers, containerships and gas) passing through the Panama Canal. So far, the emphasis has been on the liner trades and their use of the new locks on the Panama Canal, but the LPG and LNG gas carriers are expected to be significant users, too.

Will Nicaragua waterway allow largest containerships?


Details on the proposed Nicuraguan Canal are trickling out like seepage from an old lock gate but the Guardian newspaper is saying it will be wide enough for the largest containerships today. Given the time lag between what is on the water and the general press idea of a large ship, it seems this is unlikely to include the 18000 teu Triple-EEEs, the first of which is launched tomorrow (#Triple-E).

via Nicaragua waterway to dwarf Panama canal | World news | The Guardian.

Nicaragua canal gets go ahead – but no mention of capacity


Unfortunately there is no mention about dimensions or capacity, so it is difficult to gauge the impact on shipping and the Panama Canal – AFP: Chinese firm gets concession for Nicaragua canal.

The New Panamax; 13,200-TEU Containership, 120,000 dwt Bulk Carrier


Paul Stott will be presenting his latest findings on the impact of the Panama Canal extension at the Low Carbon Shipping Conference at Newcastle University today (Wed 12 September 2012). There are lots of gems in Paul Stott’s latest analysis of the New Panama Canal “New Panamax and its Implications for Ship Design and Efficiency” (2012 Paul Stott, School of Marine Science and Technology, Newcastle University), but the one I like the most  is the use of AIS data to determine the “actual” operating draft of Post-Panamax Containerships. I have been a fan of using ship movements since my days on Lloyd’s Shipping Economist, but this is a particular clever use of the data.

But I am jumping ahead. The paper examines the impact of the expansion of the Panama Canal on ship design and efficiency. The impact on trade is important, but difficult to quantify. For instance, Paul points out that only 2.5% of world seaborne trade passes through the canal, but around 25% of the commercial fleet has a Panamax beam. Indeed, a Panamax broker at Clarksons once told me only about a third of the ships he fixed had ever transited the Canal.

Under the old dimensions the constraints on commercial ships centered on the beam. By making the dimensions longer and fatter, potentially a heavier combination of ship and cargo can enter the dock system. Then the constraint becomes the ship bottoming out on the floor of the dock.

Looking at Containerships first, Paul finds that the Panama Canal Authority (PCA), may have under-estimated the new maximum permissible size. The PCA estimates the maximum size will increase from around 4800-TEU (limited by beam) to 12000-TEU. However, typical of a the large Containership with a length of 366m and beam less than 49m is the 13100-TEU “MAERSK EDISON”. In ship registers the “MAERSK EDISON” is listed as having a scantling draft of 15.5m, which is too deep for the expanded Panama Canal. But the operating draft is not as low, and using AIS data an analysis of similar vessels revealed the mean draft was 12.6m and the median 12.9m, well inside the constraints of the new Panama Canal. As 50% of the PCA revenue comes from Containership transits, this potential increase in maximum size will be very welcome news for the PCA.

On the dry bulk side, the draft limitation also arises (or should that be “falls”). Paul finds the length and beam accommodates most 180,000 dwt Capesize, but these would be too deep in the water when laden. They will, however, be able to transit in ballast. The largest laden dry bulk carrier will be around 120,000 dwt. As Paul points out, this does not necessarily mean the “Mini-Cape” will become the new Panamax, as a lot depends on the cargo lot size preferred by charterers and receivers. But ship size tends to creep upward, so it seems likely this will be the new Panamax standard.

New Handysize / Supramax and 85,000-dwt designs will benefit from the increase in Panama Canal beam, as designers will be able to optimize hull designs without the beam constraints.

On the tanker side, a Suezmax will fit in the new locks, but not fully loaded. Like the Capesize, these will be able to transit in ballast or part laded. The largest standard tanker that can past through fully laden will be the Aframax of around 120,000 dwt. As in the dry bulk sector, there is room to optimize hull designs of the small sectors, and this might benefit the Product Tanker sector.

The paper goes on to suggest areas of further study, and I have included the paper below.

LCS 2012 Paper Paul Stott REVISON A Sept 1012

Panama Canal Paper


Paul Stott will be presenting a paper at the 2nd Low Carbon Shipping Conference in Newcastle on 11th and 12th of September this year. His work on low carbon shipping includes the impact of the expansion of the Panama Canal and he will be sharing his thoughts on the future size of Panamax ships. As part of the Low Carbon Shipping Consortium he has been examining ship life cycle costs. I hope to be there, as not only as there are interesting papers being given, but to sample Newcastle’s legendary nightlife.

Where is the big Panama Canal study?


One time Lloyd’s Shipping Economist contributor Paul Stott, now of Newcastle University, was one of the attendees of Dr Martin Stopford’s Retirement Party. Paul is looking into the impact of the expanded Panama Canal, and has done his own study. But we both agreed it was surprising there isn’t a general Panama Canal Expansion Study available for sale from a shipbroker or consultant.

The expanded Panama Canal is scheduled to open in 2014/2015 and could be a massive game changer in the shipping industry. Therefore one would expect to see a shipping consultancy or research house offering an equally massive report on the subject. Questions include; What will be the size of the new Panamax Dry Bulk Carrier (harder than you think, not just based on new Canal dimensions)? How will the expanded Canal affect the Crude and Product Tanker trade? How will the proposed fees affect the liner trades? Banks are in the market for such a report. They need comfort that they are they financing ships that will retain value in a post-expanded Panama Canal era.

An internet check on the usual suspects shows no such report in the offering, although a Google search shows Fearnleys produced a report on the bunker market for the Panama Canal Authority on 2003.  Drewrys produced a report in 2005 for APL. Given the amount of data to be analysed, especially if you include vessel movements, producing a general sale report is at least a twelve month project. Having a first edition on sale now would be necessary in order to have an up to date edition available when the expanded Panama Canal opens.

Where to start? Two studies earlier studies are posted on the Panama Canal Authority website. The first is by Richardson Lawrie Associates and was published in 2001 called “The Development of Long-Term Traffic Forecasts for the Panama Canal 2001-2050“. The second study was undertaken by MergeGlobal Inc in 2003 using 1999 Panama Canal Authority data. These would form useful starting points for a new report.

Of course, it could be I didn’t look hard enough, and there is a new Panama Canal Expansion report out there. If you have produced the big Panama Canal study and it is for sale now, then send me a copy to review on this blog.

%d bloggers like this: