Ocean Freight update: Panama Canal Transits Further Down, Slow Steaming Ships, Capacity Growing Fast, and more…

What’s happening on and around our oceans?

This is our weekly ocean freight update, highlighting interesting news and background articles we came across this week. We focus on general ocean freight news, innovation, and sustainability. With the current challenges around the Panama Canal, we are also adding a section on the Panama Canal situation.

The Panama Canal

The Panama Canal Authority has again reduced the daily transits. In the absence of rain, there is no other option. Daily transits are down to 31. The normal number of daily transits used to be 40.

On the FreightWaves website, I came across an article looking back at an article from the seventies about the Panama Canal. Canal operations were a hot topic then, too.

Drought is also impacting shipping in other regions. Inland traffic on the Mississippi River is currently also limited.

While it continues to prioritise container traffic, overall canal capacity is declining. Reuters reports that over the weekend the Panama Canal Authority revealed that the lack of rain had led it reduce the number of daily transits from 32 to 31, down from the 40 a day it would normally operate. This means only nine vessels a day will be able to use its neo-panamax locks, nominally able to transit vessels of up to 14,000 teu capacity, although the draught restrictions now in place mean they can’t be fully laden. In addition, 22 ships a day will be able use its panamax locks.

Panama Canal reduces daily transits further as drought continues

Although it was billed as a forum for sharp criticism by the American shipping industry of the proposed Panama Canal treaties, Ambassador Ellsworth Bunker’s presentation for the treaty before the Washington, D.C., Propeller Club and the reaction to the Ambassador, seemed to indicate the shipping industry does not really have a strong position for or against the Canal treaties.

From the March 1978 issue of American Shipper: 

Shipowners around the world are concerned, however, that the treaty provision increasing U.S. payments to Panama for use of property in the Canal Zone will mean increased tolls.

Panama canal operations were a hot topic in the ’70s too

Months of dry weather and the hottest summer ever shrunk the vital channel that funnels barges of grain and soybeans from the Midwestern crop belt to Gulf Coast ports. Barge operators now are running lighter loads to compensate for the lack of water.

Low Water Levels on Mississippi River Delaying Barge Cargo

General Ocean Freight News

Some interesting records have been broken this past week. Bulk carriers and container ships have been moving at the slowest speed on record this year. When it comes to container ships, the capacity has never grown at such a fast pace as now. 

The ship recycling business is as slow as the container ships and the current state of the freight market is not expected to turn around until as late as 2025.

Average containership speeds between January and August were down 3% on the 2022 average, reaching a record low of 13.7 knots in February and despite subsequently ticking up to 13.9 knots in Q3, remaining below the lowest level on record prior to this year.

BIMCO statistics, meanwhile, show containership supply is set to grow 6% faster than the fleet in 2023 due to lower congestion than in 2022. Year to date 2023, containerships have on average sailed 3.5% slower than in 2022, according to BIMCO with supply forecast to grow 3% to 5% slower than the fleet in 2023 and 2024.

Bulk carriers and containerships moving at slowest speeds on record this year

According to analysis from Asia-based consultancy Linerlytica, the pace of the growth of the box fleet at the moment is the fastest on record – and is set to continue for the next two years with the sight of newbuilds being forced to idle becoming commonplace. 

Global containership capacity is growing at an average rate of over 190,000 teu a month since April, after accounting for new ship deliveries and capacity upgrades and deducting scrapped capacity and other deletions. In the past 30 days, 212,099 teu of newbuilds have been delivered.

Boxship capacity growing at fastest pace on record

As we enter the Autumnal season which is classed as the hardest season when leaves fall and trees look bare, the recycling market is currently taking on a similar scenario where activity from the Bangladeshi and Pakistani recyclers are once again meagre, with patchy activity, and only the Indian recyclers showing signs of any positive mood. 

Ship Recycling Activity Enters “Slow Season”

Carriers optimistic the freight market was starting to show signs of a turnaround should prepare for weak conditions to linger possibly into late 2025, according to economic analysts.

Behind the bleak forecast was weak U.S. economic data shared during the Journal of Commerce Inland Distribution Conference. Saturated retail inventories, rising interest rates, and elevated costs continue to weigh on freight markets’ ability to recover, despite some positive short-term signals behind consumer spending

Freight turnaround might take until 2025: analysts

Other interesting reads for this segment:

Sustainability and Innovation

The shipping industry is a big contributor when it comes to carbon emissions. Change is needed fast for the industry to turn this around and minimize its environmental impact. Already, it is getting hard to reach net zero emissions in 2050.

New ships operating on alternative fuels are still being built, but the numbers are still so low that it will not be enough. An increasing number of countries are cracking down on reporting carbon emissions; others are releasing funds to support greening the shipping industry. In the shipping industry, the recent ETS taxation is one example causing quite a stir. It is still not known what the impact will be on the cost per container.

Tsuneishi Shipbuilding based in Hiroshima, Japan received an order for four 5,900 TEU container ships powered by methanol.

This is the third methanol-fuelled vessel order, following the Kamsarmax Aeroline and TESS66 Aeroline, and the first order for methanol-fuelled container vessels.

Tsuneishi Shipbuilding receives order for four 5,900 TEU methanol-fuelled ships

Norway is not only looking at cleaning up its transport system on the road with cars and trucks, but is also looking to make its shipping lanes CO2 neutral and save further emissions. Therefore, a number of projects are now being promoted to help reduce emissions at sea.

Norway’s economic development agency Enova is funding a total of 709 million kroner (approx. 62.8 million euros) for a number of projects to decarbonise shipping, including two projects for purely battery-electric ships.

Norway issues funds for maritime electrification projects

As we are around three months away from the implementation of carbon taxation (ETS) in the European Union (EU) and everyone agrees that this will be a high cost, there is significant uncertainty as to the precise cost.

Presently, only two carriers, Maersk and Hapag-Lloyd, have in recent weeks announced indications of these coming surcharges.

“There are many methodological problems in how to calculate the cost of ETS per container, given how the EU regulators have deemed to define the ETS, and because of challenges on how to allocate that at a per-TEU level,” say Sea-Intelligence analysts adding that “carriers are by law prevented from agreeing on a common surcharge formula, which will result in misalignment between carriers.”

Sea-Intelligence reports major misalignments on ocean carrier carbon taxation

Everyone, it seems, is going to be confused about the EC’s forthcoming emissions trading system (ETS): judging by the initial “stick a finger in the air to see which way the wind is blowing” attempt by Maersk and Hapag-Lloyd to calculate possible surcharge levels (and the complete silence from their peers), shipping lines have the vaguest of vague notions.

Analysis: ‘Chicken and egg’ – the EU emissions trading system conundrum

“Clearly, action by governments and industry are not yet aligned to the NZE 2050 roadmap and appear unlikely to do so in the near term. Sensitivities in the timing and uptake of alternative fuels, energy sources and abatement technologies will be key. Volatility in commodity supply, demand and prices may also increase, as investment moves away from traditional energy sources, perhaps at times out of sync with demand. More policy is needed both at the government and NGO level, however, investment in shipping, both for new forms of energy, existing non energy cargoes and carbon will be a critical success factor behind the energy transition”, Gibson concluded.

Net Zero Emissions Targets Will be a Challenge

Other interesting reads for this segment:

That’s all for this week!

Photo by Venti Views on Unsplash

About the author:

Martijn Graat

Martijn Graat is Zergratran’s Head of Content. He writes about trends and innovations in supply chain and logistics, and anything related to Zergratran