Date: Monday, November 6th, 2023
Source: Splash 247
There’s a real prospect no large tankers could be transiting the Panama Canal from the start of next year, with VLGCs also likely to be pushed out from the interoceanic waterway, bringing dramatic changes to world seaborne gas and oil trading patterns, stretching the tonne/mile picture in the process.
At its maximum, the canal can handle 40 ship transits a day, a figure that has been eroded this year as months of record drought take their toll. In tandem, canal administrators have been forced to cut maximum draft limits for ships transiting the waterway’s larger neopanamax locks by close to 2 m.
In 2023, there has been 41% less rainfall than usual, lowering Gatun Lake to unprecedented levels for this time of year. The lake is the vital slice of freshwater necessary for ships to transit as well as supplying water to more than 50% of the country’s population. Each vessel that transits through the set of locks uses approximately 52m gallons of water.
The canal’s administrators will whittle the number of transits from 31 down to just 18 in the coming three months, a figure that will stay until further notice.
At this point, slots for the newer, larger neopanamax locks with be down to eight per day, which will mostly be taken up by container vessels with the occasional gas carrier.
“Large oil tankers will not feature in this trade anymore. They will not be able to schedule in advance like container ships do and they can likely not compete for the auction slots,” a new report from New York-based tanker brokers Poten & Partners suggested, noting how a recent auction was won by a VLGC for a record $2.85m.
“The stark reduction in slots will push many of the tramp vessels (including tankers and dry cargo ships) away from the Canal. This will lead to more ton-mile demand and possibly changes in segment utilization as longer hauls may stimulate the use of larger vessels,” Poten predicted.
“Given the current booking system, it is possible that from early next year no VLGCs will be able to transit through the new locks, while transits through the old locks will be heavily reduced,” a report from Clarksons Research forecast, suggesting significant additional tonne-miles are likely to be seen as ships instead sail around the Cape of Good Hope or via the Suez.
“Rates have firmed as a result, both on the futures and spot market, though spot market liquidity has fallen as players assess the situation,” Clarksons noted in a gas ship market update published on Friday.
For dry bulk, there is growing consensus that more large ships will look to take alternate routes rather than waiting around at the canal.
“Despite the restrictions at the Panama Canal, the market may find an alternative and use larger ships going round the Cape Horn into the Pacific adding tonne-miles and supporting bigger vessels’ demand,” a recent report from Greece’s Xclusiv Shipbrokers suggested.
The restrictions at the canal have already seen a massive switch for dry bulk. Analysis carried by S&P Global shows the Suez Canal share of US Gulf to Asia shipments have increased to 83% in October versus 23% a year ago.