Shipowners want canal toll cut

This coincides with news that many contracts for the building of post-Panamax ships have been cancelled in the face of the world economic crisis. The widening is intended to cater for these giant vessels.

With the construction boom in Panama coming to an end, and economists warning of big job losses, many are bolstering their hopes of Panama dodging the economic crisis with rosy prospects for the continuing Canal expansion project.

But critic have pointed out that the project requires continued increased transits and increased tolls to be feasible.

Lloyds lists reported last week that “Shipowners are urging the Panama Canal Authority to cancel planned toll increases while cutting more Suez Canal transits as soaring costs and collapsing markets threaten to drive some operators out of business.

“BIMCO, Intercargo, Intertanko and the International Chamber of Shipping have written to the ACP warning that there were now "serious concerns about the industry's ability to sustain a further increase" after significant price hikes over the past two years.

The letter to ACP administrator Alberto Aléman Zubieta said the economic landscape has changed considerably since the three year program of increases was first announced two years ago.

Last October the ACP administrator told the ship owners that the increases in the tolls were programmed in 2007 and they were going to be done in three different stages, the last in 2009.

Zubieta told the ship owners in statement four months ago that “the Panama Canal has always given stability in prices to the maritime industry and in 2007 the toll increases were agreed and the plan continues.”

"The current global economic crisis has already had a severe effect on many ship operators freight rates and volumes in most sectors have been badly impacted and the severe downturn is expected to last throughout 2009 and well into 2010," the Round Table group told Mr Aléman.

"In the space of a very short period of time, the situation has changed so rapidly that some regular services have already been cut and there are fears that some owners/operators will not survive."

DryShips Inc. an Athens, Greece shipping company has canceled more than $1.5 billion in planned vessel purchases.

The shipper of commodities including iron ore, coal and grain said recentlyly it was making several changes to improve its financial stability. DryShips passed off three new Capesize vessels that were being built to another company, bringing it about $116.4 million.

Capesize vessels, the largest drybulk ships on the seas, are so named because they are too big to fit through the Panama or Suez Canal and must instead navigate around the Cape of Good Hope or Cape Horn to travel between oceans.

DryShips also nixed its planned $1.17 billion purchase of nine new Capesize vessels, pointing to the steep drop in charter rates and ship values in recent months.

The global credit crisis pushed down values of ships dramatically, because letters of credit - which are required in a majority of shipping deals - were increasingly hard to secure.

Drybulk shipping rates had also been hurt by slowing global demand and slipping commodity costs.

Alemán Zubieta always said that the global financial crisis will sooner or later affect the revenues of the canal and the ACP has contingency plans in place for that eventuality.

However, in the event that ship owners decided to stop using the canal because it has become to onerous, it will be a situation that the authority has never encountered before.

The last few months have seen a reduction in canal traffic, and where before there were long lines waiting ships, now the lines are getting smaller.

The Panama Canal generates billions of dollars for the country but if the ship owners get together they could negatively affect the ACP finances.

The administrator appears not to have given any answer to the ship owners since his communication with them in October 2008.

The only option for ship owners is to wait for a response from Zubieta, but a decrease of the tolls appears to be unlikely at least in the near future.