Large Surplus of Midsize Container Ships Coming:
International shipperschoosing ETC International Freight System (www.etcinternational.com)
Sourced by JOC
The opening of the enlarged Panama Canal in 2016 likely will trigger a “massive” surplus of 4,000- to 5,000-TEU container ships, many of which will have to be scrapped regardless of their age, according to Drewry Maritime Research.
After its locks are enlarged, the waterway, which currently can only handle so-called Panamax ships up to 5,000 TEUs, will allow the transit of vessels up to 14,500 TEUs.
There is already a growing surplus of Panamax vessels due to the continuous cascading of surplus ships into the North–South trades, the London-based analyst said.
Mediterranean Shipping Company’s recently announced service between Asia and West Africa deploying 10 ships averaging 4,000 TEUs underlines a growing difficulty for the north-south
trades, as the surplus of Panamax ships keeps charter rates low, making it easier for competing carriers to penetrate markets more deeply, regardless of demand.
A similar scenario is playing out in the Asia-Australasia trade, where average vessel size
rose from 4,365 TEUs in the third quarter of 2013 to 4,900 TEUs by January 2014, and rates have turned much more volatile as well, according to Drewry. Likewise, capacity on the Asia-Brazil headhaul route spiked 17.9 percent from January to July 2013, while cargo volume increased only 4.1 percent year-over-year, such that carriers collectively lost an estimated $152 million in the first half of 2013, Neil Dekker, Drewry’s head of research, told the JOC’s TPM Asia conference last fall.
The delayed expansion of the Panama Canal has given the north-south routes a welcome reprieve, in the face of slow growth. Container shipping demand in north-south routes in the aggregate increased 4.9 percent in 2013 and is forecast to grow 5.7 percent in 2014.
Growth was 10.3 percent in 2011 and 3.1 percent in 2012.
Around 150 ships of 4,000- to 5,000-TEU capacity are still using the waterway between Asia and the East Coast of North America alone. A further 58 Panamax vessels are deployed on routes between Europe and the west coast of South America and between the east coast of North America and the west coast of South America, many of which need to be replaced by larger ships, Drewry said.
Carriers “desperately” need further economies of scale than Panamax ships provide to move into profit, underscored by the decision by Evergreen last month to ship more cargo from Asia to the U.S. East Coast via the Suez Canal instead of Panama.
An additional 377 ships with capacities between 4,000 and 4,999 TEUs are currently deployed on services that don’t transit the Panama Canal or are laid up, so a transfer of just a small number of the 258 vessels using the waterway would cause a shock to the system,
according to Drewry.
Some of the surplus ships will be scrapped — 19 Panamax vessels were sent to the breakers’ yards in the first three months of 2014, compared with just seven through 2013.
As the average age of the Panamax fleet is just eight-and-a- half years, and 73 percent of the fleet is less than 11 years old and therefore not depreciated, some owners likely will seek to
re-engine vessels or even enlarge them. The capacity of the Panamax sector is 2.8 million TEUs, or 16 percent of the total world fleet, and half of it would have to be scrapped after the widened Panama Canal opens to rebalance supply and demand.
Shipping to Asia:
Japan, US Fail to Strike Trade Deal
Japan and the United States failed to reach a deal in bilateral negotiations over the proposed Trans-Pacific Partnership (TPP) free trade agreement during President Barack Obama’s
three-day visit to Tokyo, which ended on April 25.
In the hope of striking an 11th-hour broad agreement, the two countries continued to hold hectic ministerial and working-level negotiations even after Japanese Prime Minister Shinzo Abe and Obama held talks on April 24.
But the two countries failed to resolve sharp differences over the Japanese import tariffs on some U.S. agricultural products, including beef and pork, and the U.S. import tariffs on Japanese cars.
Akira Amari, Japan’s state minister in charge of the TPP talks, told reporters on the morning of April 25 that although the two countries made progress in the negotiations, they failed to
reach a broad agreement.
The TPP is a U.S.-led regional free trade initiative currently being negotiated among the U.S., Japan and 10 other Asia-Pacific countries — Australia, Brunei, Canada, Chile, Malaysia, Mexico,
New Zealand, Peru, Singapore and Vietnam.
The overall TPP negotiations have stalled due largely to sharp differences between the U.S. and Japan, the world’s largest and third-largest economies in terms of gross domestic product
(GDP).
Japan and the U.S. issued a joint statement immediately before Obama left Tokyo for South Korea, the second leg of his four-nation Asian tour, which also includes visits to Malaysia and the Philippines.
The United States and Japan “coordinate closely in multilateral financial and economic fora to advance trade liberalization and promote economic growth,” the two countries said in the
joint statement.
“In order to further enhance economic growth, expand regional trade and investment, and strengthen the rules-based trading system, the United States and Japan are committed to taking the bold steps necessary to complete a high-standard, ambitious, comprehensive
Trans-Pacific Partnership (TPP) agreement,” they said.
“Today we have identified a path forward on important bilateral TPP issues. This marks a key milestone in the TPP negotiations and will inject fresh momentum into the broader talks,” they said.
“We now call upon all TPP partners to move as soon as possible to take the necessary steps to conclude the agreement. Even with this step forward, there is still much work to be done to conclude TPP,” they added.
International Shipping to Asia, Africa, Middle East, Mediterranean regions, Russia, Eastern, Western & Northern Europe.