Handy and Supra operator sees higher voyage freight rates for canal transits and disruption to trade patterns as shippers seek to manage risks of price inflation.
 
Delays in transiting the Panama Canal have eased slightly in recent weeks but the financial impacts continue to be felt by ship and cargo owners, with little sign that the situation will improve in the short term, according to Thomas Zaidman, Managing Director of Sagitta Marine.
 
While the impact is baked-in to voyage costs for ships already in the queue, Zaidman warns that the 10 months of transit restrictions announced by the Panama Canal Authority could have a larger effect on dry bulk trade flows, tonne-miles and the competitiveness of the region’s exporters.
 
Zaidman, whose company operates tonnage for some of the region’s largest cargo owners, says even with a slight fall in waiting times, a Handysize vessel owner is still looking at a $160,000 lumpsum for a 10 day wait at the canal. A vessel around 55,000dwt would be looking at an additional $220,000 lumpsum payment.
 
In future, cargoes that regularly cross the canal could find themselves fighting to remain profitable as buyers look to more distant markets that would have lower overall costs, despite a higher tonne-mile ratio, he adds.
 
“The situation in the Panama Canal has both immediate and long-term consequences. Price inflation is an issue, but the reality is that, as owners ask for higher rates to price-in the additional costs of delays, it may change the origin point for some cargoes.”
 
For shipments already booked the shipowner has to assume the cost of canal delays which are considered weather risks. In the future, Zaidman thinks where charterers seek voyages across the canal owners will attempt to raise prices to counter waiting times or look for new export locations.
 
“In one scenario, rising costs from continued delays could start to make US grains less competitive compared to cargoes ex-Argentina even though there is an increase in tonne-miles and carbon emissions,” Zaidman adds. “Owners aren’t going to sail around the canal; the cargo is going to move from different locations.”
 
In addition to the carbon emissions from ships currently idling at anchor, the larger unintended consequence is an increase in tonne-miles and therefore carbon emissions in sections of the fleet as ships travel further to load and discharge.
 
“That’s the longer-term issue at play here. The worse than average drought in Panama is a result of extreme weather and an El Nino year but the trend we’ve seen this year is clear. Climate change is going to impact all aspects of our lives and permanent cost inflation is something we as an industry will also have to deal with as its effects become more pronounced,” Zaidman concludes.