Choke Point Threat? Asian shipowners denounce toll increases in the Panama Canal
July 13, 2012 (TSR) - Asian shipowners have lobbied the Panama Canal Authority to withdraw any increase in the canal’s toll fee in 2012 and 2013, according to a copy of a letter sent to the authority and obtained Thursday by Platts.
The Asian Shipowners’ Forum, which represents shipowners’ associations in Asia and Australia, asked for the withdrawal of any increase of canal fees, citing a struggling shipping industry dealing with “the dismal global economic situation,” according to the letter dated July 11.
The World's 6th CHOKE Point: Panama Canal
Supported by the Japanese Shipowners’ Association (JSA), ASF are saying that the toll increase were made without consultation and at a time when the industry can least afford them.
According to the ASF, the toll increase “would inevitably add an inordinate burden to all canal users who are part of the global supply chain including carriers, shippers and customers around the world.”
“Under the current economic situation, the newly proposed toll increase would be detrimental to the shipping industry,” said the ASF, which was separately issued by the JSA.
Said the ASF statement: “Given the importance of the Panama Canal as an international public infrastructure vital for efficient operation of the global supply chain, the notice period for the proposed toll increase given by the ACP was too short.
“The proposed toll increase was unilaterally formulated without any form of consultation or dialogue with the shipping industry and the ASF is of the view that this may inhibit business planning which could possibly lead to reduction in the total revenue received by the ACP,” the statement said.
The toll charges are slated to come into effect this month and would affect various segments such as container, reefer, dry bulk, passenger, vehicle carrier, Ro-Ro, tanker, chemical tanker, LPG, general cargo and others. The latest hike was announced late April by the ACP.
The ACP had initially established a consultation period from April 20 to May 21, but extended it until July 12, during which the authority would receive formal written comments, opinions and written requests from interested parties.
A schematic of the Panama Canal, illustrating the sequence of locks and passages. Courtesy of La Société internationale du Canal.
EIA: The Panama Canal is an important route connecting the Pacific Ocean with the Caribbean Sea and Atlantic Ocean. The Canal is 50 miles long, and only 110 feet wide at its narrowest point called Culebra Cut on the Continental Divide. About 14,000 vessels transit the Canal annually, of which more than 60 percent (by tonnage) are for traffic to and from the United States.
Closure of the Panama Canal would greatly increase transit times and costs adding over 8,000 miles of travel. Vessels would have to reroute around the Straits of Magellan, Cape Horn and Drake Passage over the tip of South America.
However, the Panama Canal is not a significant route for petroleum transit or for U. S. petroleum imports. Roughly one-fifth of the traffic through the canal (measured by both transits and tonnage) was by tankers. According to the Panama Canal Authority, 0.8 million bbl/d of crude and petroleum products were transported through the canal in 2009, of which 620,000 bbl/d was refined products, and the rest crude oil. Most petroleum traffic passed from north (Atlantic) to South (Pacific).
However, the relevance of the Panama Canal to the global oil trade has diminished, as many modern tankers are too large to travel through the canal. Some oil tankers, such as the ULCC (Ultra Large Crude Carriers) class tankers, can be nearly five times larger than the maximum capacity of the canal. The largest vessel that can transit the Panama Canal is known as a PANAMAX-size vessel (ships ranging from 50,000 – 80,000 dead weight tons in size and no wider than 108 ft.)
In order to make the canal more accessible, the Panama Canal Authority began an expansion program to be completed by end-2014. However, while many larger tankers will be able to transit the canal after 2014, some ULCC’s will still be unable to make the transit.
The proposed toll tariff for a laden tanker for the first 10,000 Panama Canal/Universal Measurement System (PC/UMS) net tonnage, would be $4.68 PC/UMS ton from July 1, up almost 5% from $4.46 PC/UMS currently. For 2013, the increase would be 5.12% for tankers.
While calling for the withdrawal of the proposed increase in toll charges, the ASF suggested having “a constructive dialog process” between the canal authority and interested parties in the shipping industry in order “to discuss and formulate stable toll adjustments.”
In addition, the ASF asked for the reconsideration of an earlier pricing policy called the “Proposals for the Expansion of the Panama Canal” that was issued by the ACP in April 2006.
Tolls for the canal are decided by the Panama Canal Authority and are based on vessel type, size, and the type of cargo carried. Increasing volumes of imports from Asia, which previously landed on the U.S. west-coast ports, are now passing through the canal to the American east coast. The Panama Canal Authority (ACP) has invested nearly US$1 billion in widening and modernizing the canal, with the aim of increasing capacity by 20%.
Despite having enjoyed a privileged position for many years, the canal is increasingly facing competition from other quarters. Because canal tolls are expected to rise, some critics have suggested that the Suez Canal may become a viable alternative for cargo en route from Asia to the U.S. east coast. The Panama Canal, however, continues to serve more than 144 of the world’s trade routes and the majority of canal traffic comes from the “All-Water Route” (the route from Asia to the U.S. East and Gulf Coasts via the Panama Canal).
Asian Shipowners’ Forum (ASF) was founded in April 1992 when its first meeting was held at Japan Shipping Club in Tokyo. As one of the important shipping organizations in the world, it consists of eight members from the shipowners’ associations of Asia Pacific nations, i.e. Australia, China, Hong Kong,India, Japan, Korea, Chinese Taipei and Federation of ASEAN Shipowners’ Associations (FASA), consisting of Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. The aims of the ASF are to promote the interests of the Asian shipowning industries. Between annual ASF meetings, the ongoing work is carried out by the five Standing Committees; the Shipping Economics Review Committee, the Seafarers Committee, the Ship Recycling Committee, the Safe Navigation and Environment Committee, and the Ship Insurance and Liability Committee. It has been estimated that ASF owners and managers control and operate nearly 50% of the world’s cargo carrying fleet.