Owners call for Panama toll cuts as Suez feels the squeeze

Janet Porter - Thursday 29 January 2009

SHIPOWNERS are urging the Panama Canal Authority to cancel planned toll increases while cutting more Suez Canal transits as soaring costs and collapsing markets threaten to drive some operators out of business. 

Suez Canal traffic is set to shrink further as Mediterranean Shipping Co considers diverting more container services around the Cape of Good Hope. 

After already deciding to reroute the eastbound leg of its Asia-Europe Lion service, MSC said today it was now “actively examining other services that might be routed via the Cape of Good Hope in order to reduce our operating costs by avoiding Suez Canal dues”. 

One possible candidate under serious consideration is MSC’s Europe-Australia rotation, the Geneva-based company told Lloyd’s List. 

This latest cost-saving initiative coincides with a renewed effort by leading shipowner groups to persuade the Autoridad del Canal de Panama to cancel, or at least defer, 2009 toll increases. 

BIMCO, Intercargo, Intertanko and the International Chamber of Shipping have written to the ACP warning that there were now “serious concerns about the industry’s ability to sustain a further increase” after significant price hikes over the past two years. 

The letter to ACP administrator Alberto Aléman Zubieta said the economic landscape has changed considerably since the three year programme of increases was first announced two years ago. 

“The current global economic crisis has already had a severe effect on many ship operators — freight rates and volumes in most sectors have been badly impacted and the severe downturn is expected to last throughout 2009 and well into 2010,” the Round Table group told Mr Aléman. 

“In the space of a very short period of time, the situation has changed so rapidly that some regular services have already been cut and there are fears that some owners/operators will not survive.” 

The letter also pointed out that the Suez Canal Authority had announced an indefinite freeze on transit fees. 

“Our members have therefore been concerned to read that, in contrast, you have been quoted as saying that the ACP intends to press ahead with the toll increases already announced for 2009, and indeed is considering possible further increases in 2010.” the quartet said. 

Industry sources quietly acknowledge that the Panama Canal has more of a captive market than the Suez Canal, although container lines could restructure all-water Asia-US east coast services and return to less congested west coast ports, if that made commercial sense. 

The Suez Canal is more vulnerable to traffic deviations, now that bunker costs have fallen so sharply.
MSC, the world’s second largest container line, is following CMA CGM whose joint FAL2 service is already taking the longer route in order to avoid canal dues of around $600,000 per transit. The voyage takes exactly one week longer. That keeps service disruption to a minimum by enabling port calls to remain on the same day of the week. 

The project has gone so well that CMA CGM is now looking at other services that could go via the Cape of Good Hope, and may even reroute westbound headhaul services as well. 

Maersk Line has take similar action, but has said this will only continue for six sailings during the current slack period. 

With fuel prices now much cheaper, the added cost of bunkers is far less than the Suez Canal toll saving, making a sizeable net gain for container lines. 

The canal has already suffered a huge loss of business because of the large number of Asia-Europe loops that have been withdrawn in recent months. Additionally, some bulkers, tankers and general cargo ships have been diverted to avoid the risk of a pirate attack. That also reduces insurance premiums. 

Drewry Shipping Consultants is forecasting a 4% decline in Asia-Europe container volumes this year.
For a service deploying very large boxships, Suez Canal fees could add up to around $25m a year.

Shipowners are hoping their actions will put pressure on the Suez Canal Authority to offer rebates, but the four industry organisations have not yet followed up their letter to ACP with a similar approach to the Egyptian organisation .

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