FINANCIAL CRISIS

Panama Canal transit falling off

04-15-2009 | MARIJULIA PUJOL LLOYD

mpujolstar@laestrella.com.pa

The figures are better than expected according to company officials and not so bad as the reduction in the Suez Canal

Panama Star PANAMA. The Panama Canal is starting to be hit by the financial global crisis and this has been reflected in the reduced number of transits.

The Panama Canal Authority ACP said that the transits of the Panama Canal slipped 1.4 percent in the second fiscal quarter.

However, the Executive Vice-president of Operations , Manuel Benitez said that the results are better than expected, because the forecast was a diminution of 5 per cent.

“Our results for this quarter paint a favorable picture of how the Canal continues to weather the global economic crisis. Second quarter numbers remained steady and we do not expect to see major fluctuations,” said Benitez.

He added that “The ACP will continue to follow these developments closely and remains fully committed to meeting the needs of its customers and the industry.”

A total of 3,914 ships passed through the Canal from January through March instead of 3971 vessels for the same period last year.

Fewer super size ships are using the inter-oceanic way and their transit numbers declined by 2.9 percent – to 1,815 transits from 1,869.

While the overall tonnage dropped 3.3 percent to 75.7 million tons from 78.4 million tons a year earlier.

The key segments such as general cargo, dry bulk and tanker transits increased, while refrigerated (reefers), container, vehicle carrier and passenger transits decreased.

The average time it takes a vessel to transit the Canal decreased 27.9 percent to 26.22 hours from 36.39 hours.

Canal Waters Time for booked vessels decreased 19.5 percent to 15.83 hours from 19.66 hours. Use of the booking system decreased 15.6 percent to 79.56 percent utilization from 94.31 percent.

The official accident rate declined 32.4 percent to 1.02 accidents per 1,000 transits from 1.51 per 1,000 transits.

In February 2009 the ACP was severely criticized for increasing the tolls and the French based CMA CGM line decided to route their ships around Africa on the return journey from Asia, advising that they would save over $200,000 across the fleet.

Even the Maersk line was considering rerouting some of their vessels around Africa, as well as around the Cape Horn to save money, but it has done nothing so far.

Currently, according to an article in the Journal of Commerce CMA CGM, with profits down 87 percent from last year is negotiating a deal with the ACP to reduce tolls or at least put off some scheduled toll increases. The company has not revealed the results of the negotiations.

However the constant threat of Somali pirates roaming the waters of the Gulf of Aden is making some ship owners think twice about this idea.

It appears that the Panama Canal is faring better than the Suez Canal that has experienced a decrease in transit of 21.3 percent in the threemonths January to March 2009, compared with last year.

The Egyptian government announced that the diminishing traffic is due to an increase of pirate activity in the area.

The ACP is going ahead with its expansion program, hoping that the current financial crisis will not be too damaging to traffic in the canal.

The problem is that with its biggest clients such as United States, China and European countries having cash flow difficulties, the canal transit will diminish at least for the next 18 months, before signs of recovery begin to appear.

The ACP administrator, Alberto Aleman Zubieta has insisted on numerous occasions that the forecasts for the canal performance have taken into account the global financial crisis and a decrease in transit through the canal and therefore there is nothing to worry about.

This is an optimistic attitude to have when things are going badly around the globe and economies are shrinking.

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PANAMA CANAL WIDENING

For decades the Panama Canal has been a major source of income for the national treasury and in these uncertain times, when economies around the world are going belly up, many people are wondering if the the widening of the inter ocean waterway was a good idea.

The fact remains that ships are becoming constantly bigger, and the canal is unable to accommodate them. Therefore the only alternative is to widening the waterway.

Panama is a country with an incredible geographical position, which sets it apart from the rest of the other nations in the region. That it is the reason why its economy is not suffering as much as the rest of Latin America.

Only time will tell if the canal widening was a wise decision or an untimely mistake.

MARIJULIA PUJOL LLOYD