Classic Panamaxes Feel the Pinch of Expanded Panama Canal
The new Panama Canal locks will be inaugurated on Sunday, June, 2016, with the transit through the exnapded waterway of a a 9,400-TEU neo-panamax vessel.
While the expanded canal will be able to accommodate larger ships, the opening “will inflict a severe blow to the classic panamax market,” according to a recent report from Alphaliner, an ocean shipping information company.
Alphaliner defines classic panamax vessels as those with a capacity of between 4,000 TEU and 5,300 TEU and an overall breadth of 13 container rows.
“This sector is already most affected by the general containership oversupply,” the report noted, “as classic panamax ships have been massively displaced from service over the past eight months.”
The deployment of larger vessels throughout the global trades combined with service restructurings have forced these vessels out of several of their core trades. There are only limited alternative opportunities for redeployment, according to Alphaliner.
“Idling and lay-ups of classic panamax ships have been building up over the past few months, while scrapping has also accelerated,” the report said. “As a consequence, panamax ships as young as 14 years were sold to scrap buyers.”
As 6,000 TEU to 10,000 TEU neo-panamax vessels are introduced into Panama Canal services the redundancies of classic panamaxes will accelerate, Alphaliner predicted. Carriers are now making these anticipated moves and the market is feeling the pain. Charter rates for 4,200 TEU ships have slipped to as low as $4,750, below the daily operating expenses for these types of vessels.
“Demand for maxi-panamaxes, a sub category of classic panamaxes optimized to make full use of the existing Panama locks dimensions, is vanishing,” the Alphaliner report concludes, “as the opening of the larger locks seals the ships’ fate. After having been the kings of the container trade in the two decades that followed the launch of the first generation of maxi-panamax containerships in 1972, and so far the optimal choice for services requiring a Panama transit, these vessels are now facing their demise.”