Suez canal outshines Panama as conduit for S America trade
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The Suez Canal can handle vessel sizes that will transit the wider Panama Canal and is gaining more popularity as manufacturing in China wanes and shifts to countries in Southeast Asia, reports Shipping Correspondent Paul Richardson
By 2014, work on the widening of the approach locks along the Panama Canal is expected to be completed, and as a result a vitally important waterway system that can presently handle vessels of no more than 32.3m in breadth and just over 5,000 TEU capacity, will be capable of accommodating vessels at least twice that capacity.
Within a year of completion of that work, the transhipment potential of ports in the Caribbean such as Kingston, will take a big leap following plans of a major long-term investment programme in the new Gordon Cay Container Terminal.
CMA CGM has signed a Memorandum of Understanding for 35 years, marking the start of a major investment programme in the terminal before it is fully commissioned in 2015.
According to shipping sources, these two projects show the investment is worth it and the Panama/Caribbean conduit will cater for the main Asia-Latin America growth potential.
The alternative route to serve this trade is the Suez Canal transit, and there is no capacity restriction on vessels using the Suez, and currently vessels of up to 9,000 TEUs are regularly transiting the canal to cover the Asia-Latin America trade.
According to shipping line sources, the cost of a single transit of the Panama Canal is around US$1 million, the same as that for the Suez Canal and the vessel capacity through the Suez is almost that of the "wider''Panama Canal, which will take three more years.
Latest figures from UK-based PR News Service ComPort database show that the capacity increase serving the Asia-Latin America trade through the Panama Canal has risen only around two to three percent in the last 12 months due to vessel size restrictions. However, in the same period, Suez capacity has jumped considerably and is well into double-digit figures, rising from 30,000 TEUs weekly to almost 40,000 TEUs.
These figures are based on not just the Latin America potential, but also the US East Coast market, which indicates that the 2014 Panama Canal widening programme may be a little late.
For lines to cover the Asia-Latin America trade via the Panama Canal, nine vessels can operate on a slow steaming basis to provide a 63-day round voyage schedule. It is the same for transit through the Suez. The big difference is the market source - the Panama Canal transit time and vessel deployment relies on the strength of the northern and central China export market while the Suez transit centres on the geographical location of countries such as Vietnam and those within the Southeast Asia complex, such as Thailand and Indonesia, with transhipment potential over ports such as Singapore, Tanjung Pelepas and Port Kelang.
Given the revenue-earning potential of operating a service that has a multi-trade initiative, as against an end-to-end programme, the Suez is a better alternative, say some line executives.
"The China export power house is on the wane, and there is increasing focus by shippers on the Southeast Asia sector, importantly over countries such as Vietnam, Thailand, Indonesia, Singapore and Malaysia," they explained.
One executive said China had "become tired", and the closure of factories and lay-off of workers in several areas had switched focus to other parts of Southeast Asia such as Vietnam that was emerging as a major source of manufactured goods and other commodities.
"In reality, given the situation right now, it would seem the widening of the Panama Canal is long overdue, and the ability and proven potential of the Suez route to handle vessels of over 8,000 TEU capacity along with its multi-trade potential, has already underlined the importance of the latter."
For Panama, 2014 maybe a little late, but that all depends on the resilience of the China export market, and whether the bubble could burst further south in areas where boom time is only just beginning.