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Panama expansion unlikely to bring boom in transshipments: port analyst says

Nov.17--THE research professor at the Ports and Waterways Initiative of the University of New Orleans, Asaf Ashar, has thrown cold water on widespread predictions that an expanded Panama Canal will set off a boom in Panamanian transshipments.

"The assumption is that as ship sizes grow dramatically, the incidence of transshipment also will grow dramatically. This is not happening," said Mr Ashar in an IHS Media report.

He said transshipment will grow at a slower rate, and that much of the increase will be at non-Panamanian ports such as Cartagena, Colombia, contrary to the expectations of many industry analysts who say the canal expansion will generate double-digit growth in transshipments at or near the canal.

Transshipment growth will be dampened by the growing dominance of carrier alliances, Mr Ashar said. Alliance power, larger ships and dredging of secondary ports are leading container lines to continue direct calls that once seemed likely to be replaced by hub-and-spoke transshipment.

Mr Ashar outlined his argument in a presentation to the TOC Americas port conference in Panama, where transshipment terminals are being expanded in anticipation of the scheduled opening of new locks at the canal.

The new locks will handle ships with capacities of up to 12,000 to 14,000 TEU, nearly triple the TEU capacity of the largest container ships that can transit the canal's existing locks. The US$5.25 billion project is expected to be completed in April.

As carriers form alliances in order to fill mega-ships, they're more likely to reconfigure direct services by adding or dropping port calls than to dramatically increase transshipment, Mt Ashar said, adding that global transshipment levels have stalled at about 30 per cent of total volume.

Mr Ashar cited Asia-Europe routes, where the 2M and G6 alliances' large ships now directly call Baltic ports previously served by transshipment. In the US, the CKYHE and 2M alliances now call Baltimore directly with cargo that once would have been trucked or barged from Virginia or other ports.

"Alliances can put together more traffic, and more traffic usually justifies more direct calls," he said. "If you have two parallel services with slightly different port calls, it makes sense to put them together."

Not every port will emerge a winner in such a scenario. Some secondary ports' current services exist primarily because of unique relationships with an individual carrier. Alliances may find it easier to abandon such a direct call, Mr Ashar said.

"Alliances give carriers more freedom to offer direct services. Some second-tier ports may survive with direct calls. Others may not."

Route consolidation is especially likely on the west coast of South America, he said. Hapag-Lloyd and Hamburg Sud plan to deploy 10,500-TEU ships that will have slots for more than 2,000 refrigerated containers.

Ports are deepening harbours to handle these larger ships. Mr Ashar expects the ships to concentrate their calls at major ports such as Callao, Peru, and to serve secondary ports such as Guayaquil, Ecuador and Paita, Peru by feeders from ports along the South America coast.

"There will be transshipment, but the question is where it will be done," Mr Ashar said. "Will it be in Panama, or Cartagena, or, in my judgment,N more likely down the coast in South America?"

He said rapid growth in ship sizes casts doubt on prospects for large-scale transshipment at the canal between high-volume east-west routes and north-south services.