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Trans RINA, Vol 153, Part A4, Intl J Maritime Eng, Oct-Dec 2011


4. HOW WILL THE EXPANSION OF THE CANAL AFFECT TRADING PATTERNS?


The short answer to this question is that it has not been possible to predict in advance. In an article published in Fairplay magazine (“The Post-Expansion Puzzle”) on 1st July 2010 [12] the magazine states that “it is far too early to know how box carriers will reroute after the new canal debuts” and presents a number of conflicting views as to what may happen depending on assumptions on port limitations, demand growth and other variables. It appears pretty certain that container trades will grow but in what form it is not possible to say in definitive terms at present.


The implications for bulk carrier trades are even less certain and there are a number of key unknowns that make predictions difficult. Chief amongst these are the following.


 What will the cost of transit be? This clearly has a significant effect on the decision whether to route through the canal or around the Cape.


 How will demand for bulk shipping and fleet supply develop? The opportunity to add new capacity through the introduction of new large ships is constrained by existing committed capacity (see Table 7).


 What will fuel price and newbuilding price be? These two variables have a significant effect on the economy


of scale that can be achieved introducing larger ships and both are volatile. For


example the price of a Panamax bulk carrier fell from a peak of $55 million in 2007 to $34.5 million at by mid-2010. [13]


 How well will infrastructure support the introduction of larger vessels?


Ultimately the market will decide by ordering new ships. Recent ordering statistics have shown an increase in demand for a new class of ship currently designated by the industry as “Mini-Cape” sized vessels, too large to transit the canal but smaller than the current Capesize class, which is typically around 160,000 dwt. The increase in the fleet and the distribution of size are shown in Figures 2 and 3.


100 150 200 250 300 350 400 450 500


50 0


1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Year


Figure 2: Growth in the “Mini-Cape” fleet sector6 A-218 by


100 150 200 250


50 0


85000 90000 95000 100000 110000 115000 120000 Dwt


Figure 3: Distribution of size of “Mini-Cape” ships6


It can be seen from figure 2 that the fleet of Mini-Cape vessels is set to treble in terms of numbers of ships between 2009 and 2014. These ships are examples of “early adopters” in the new post-expansion Panamax dry bulk sector.


5. THE ECONOMIC CASE FOR LARGER BULK CARRIERS


5.1 OVERVIEW


It is almost axiomatic that ships get larger over time, although occasionally the reverse happens as with very large tanker sizes in the 1980s [1]. Buxton states that “a view on future size trends depends on ones view of the causative factors”.


listed in Buxton’s paper, of which one, “substitution for older type” applies in this case. Panama Canal’s constraint


generate any new bulk trade, although it may lead to some modification of trading patterns. On this basis the development of a new Panamax class may be relatively slow, given that capacity for the new ship type may be generated by relatively modest


Ten possible causative factors are The relaxation of the


isn’t in itself going to


trade growth and


substitution for ships in a fleet sector that is relatively modern: almost 60% of the existing fleet is currently on order as shown in Table 7.


The choice of class of bulk carrier (Handymax, Panamax or Capesize) is determined “principally according to the commodity shipped, the length of the trade route and the depth of water in the ports served” [14].


In summary


iron ore and coal tend to be carried in Capesize parcels and all other bulks (grain, bauxite and so on) tend to be carried in Panamax or smaller parcels. Substitution is possible between cargoes in the upwards direction, however, that is to say Panamax ships can carry Capesize cargoes but the reverse is not generally true. This is termed “intra-marginal substitution” by Engelen and Dullaertzx: “Capesize can not enter all ports due to draft restrictions”


but “most ports can receive Panamax


vessels”. The resulting conundrum for ship owners is that they can obtain a lower unit cost with Capesize ships but they tend to be inflexible and this does not therefore tend to lead to improved profitability for Capesize vessels.


©2011: The Royal Institution of Naval Architects


Panamax vessels, on the other hand, can be


No ships


No. Ships


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