It was another lacklustre month for the shipping industry as freight rates in almost all sectors softened further. Drewry’s Earnings Index declined by 0.5% during the month to 52.4.
The new locks of the Panama Canal finally became operational in June, enabling vessels of up to 49-metre beam, 366-metre LOA and 15-metre draught to pass through, which in turn will affect trade patterns in various sectors.
The canal can now accommodate containerships of up to 12,500 teu. As more ULCVs are being delivered each month, carriers are desperately looking for new homes for smaller vessels (8,000-12,000 teu) cascaded out of the Asia-Europe trade.
Drewry expects 8,000-12,000 teu vessels from Asia-ECSA (via Suez), Asia-Med, Asia-WCSA and Asia-West Africa trades to replace many of the existing Panamaxes transiting the canal.
However, Drewry believes that the short-term benefits of the new locks for USEC ports will be marginal as many East Coast ports are not ready to handle bigger vessels. Although plans to upgrade port infrastructure have been approved, implementation has been put on hold.
For the LPG sector, the new locks will have a negative impact on tonne-mile demand as it will shorten the voyage length between the US and Far Eastern countries, meaning fewer vessels will be required to carry the same quantity. Of the total US LPG exports in 2015, 31% was destined for the Far Eastern countries.
After the opening of the new locks, most vessels will move through the Panama Canal instead of the Cape of Good Hope. On the other hand, for LNG shipowners, the widened canal will not bring any immediate change in the current LNG trade pattern as LNG exports from the US are yet to increase.
The canal will enable Aframaxes, LR2 products tankers and some Suezmaxes to pass through. It currently handles only a small portion (0.3%) of global crude trade. Although the expansion is unlikely to have any significant impact on crude trade patterns, some of the existing trade such as Peru’s imports from the Caribs will now move on Aframaxes or Suezmaxes through the canal.
Similarly, products trade through the canal, which currently accounts for about 3% of the global products trade, will increase as US products exports to WCSA especially Chile will now move via Panama instead of Cape Horn.
This will reduce the voyage length of LR2 vessels, hurting tonne-mile demand. However, LR tankers will benefit from the expected increase in naphtha exports from the US to Far East once the planned condensate splitters come online.
The chemical trade pattern is likely to remain unchanged as most chemicals are traded on smaller vessels, but with the rise in US methanol exports to the Far East, the demand for large chemical tankers on the Transpacific route might increase. A similar trend is expected in the dry bulk sector with no significant change in the trade pattern.