Redrawing the map for Panamaxes

The opening of an expanded Panama Canal, now due for April 2016, will reshape modern ship definitions with a whole class of ships set to disappear. Today’s Panamax vessels, which are in the 4,800 teu to 5,300 teu range depending on their dimensions and loading configuration, currently ply the Asia-US East Coast, Europe-east coast South America,  and Asia-east coast South America trades.

These vessels are likely to disappear from these trades altogether, as operators opt for the lower slot costs offered by what Alphaliner terms the neo-Panamax class, that will come into existence once the expansion project is complete.

“Roughly half of the maxi-Panamaxes of 4,800 to 5,300 teu currently in service are employed on Panama routes, and most of them would be made redundant,” the consultant said, adding that many of the current vessels are likely to be destined for the scrapyard.

“With less than one year to go before the expected opening, a large-scale redistribution of tonnage appears to be on the horizon. While this will help absorb the excess of 8,000 teu to 10,000 teu ships that have been pushed out of east-west routes by ultra large container vessel (ULCV) newbuildings, it will also drive many traditional maxi-Panamax ships out of business.”

The introduction of so many ULCVs in recent months has been blamed for the chronic overcapacity on the Asia-Europe trade and resultant extreme freight rate volatility. There is hope that by opening the Panama Canal to such an extended class of vessels, new routes will also be made available to them.

The Panama Canal Authority (ACP) states that the maximum neo-Panamax vessel length is 366m, with a beam of 49m and a maximum draught of 15.2m. According to Alphaliner’s fleet database as at the end of July, there are 190 neo-Panamax container ships currently in service, with another 125 units on order ranging in size from 8,600 teu to 14,000 teu.

Alphaliner’s definition of these neo-Panamax vessels is those with the maximum width able to transit the new locks, with the 49m beam equivalent to 19 container rows across. It includes all vessels that are currently operating and on order that are anywhere between 299m long, which allows for a total of 17 bays, and 366m long, which allows for 22 bays.

In addition to the current and on order fleet of neo-Panamaxes, there are 468 vessels currently in operation, with capacities ranging from 6,000 teu to 11,000 teu, that the analysts believe will be pitched into competition with the neo-Panamaxes. This range of what it terms sub neo-Panamax are within the same length range but possess beams of between 42m and 43m, or 17 rows of containers across, or beams of 45m to 46m, which allow for 18 rows across.

Tellingly, however, there are just five vessels on order across the matrix of possible dimensions in this sub neo-Panamax class, indicating that operators and owners will go straight for the neo-Panamax dimension when they order vessels.

Apart from the expansion of the canal, it is easy to forget that for many carriers future growth will be found in markets which do not need the Panama Canal. A lot of wide beam neo-Panamax vessels have been designed more for their ability to offer lower slot coasts on African, Latin American and other secondary port trades where port restrictions are the number one consideration. In the case of Black Sea services, the Bosporus-max, which happens to be almost identical to the new Panama Canal limits.

Port limits are present in mature markets as well: “Until now, various constraints have limited carrier investments in new neo-Panamax container ships designed specifically for the Far East-US East Coast via Panama trade. The main constraint on the use of larger ships on this route is not the existing Panama Canal limits, as larger ships can already use the Suez route, but rather lies in US East Coast ports limitations,” Alphaliner said.

These limitations include draught restrictions at many ports along the East Coast, from Florida north to Boston. In New York there is also the infamous air draught restriction imposed by the Bayonne Bridge, which restricts vessels that are over 46m higher than the water line – generally vessels of over 10,000 teu – from calling at terminals upstream of this bridge. The Port Authority of New York & New Jersey is working on a $1.3 billion project to raise the bridge to 65.5m, but it will not be completed until the second quarter of 2017. Once the expanded Panama Canal is opened it will be interesting to see if a new form of Bayonne-max vessel is developed.

One of the most intriguing questions next year for operators and owners looking to meet demand on specific lanes, will be how many of the vessels currently operating between Asia and the US East Coast via Suez will operate through Panama, and how many of them will need to be redeployed elsewhere as neo-Panamax ships begin to take that cargo via Panama.