Royal Belgian Institute of Marine Engineers
SUEZ AND PANAMA Waterways of blue gold
If the Suez and Panama
Canals were ever to close,
the entire architecture of
today’s international trade
routes and global supply
chain would have to be
redesigned. On the shipping
industry’s primary East-West
artery, these waterways
determine the pace of
globalisation in markets
where just-in-time delivery is
critical.
The Miraflores locks, Panama
Every containership captain knows that you have to
arrive on time when you book a slot to transit either
the Suez Canal, which links the Mediterranean and the
Indian Ocean, or the Panama Canal, which joins the
Atlantic and the Pacific. Missing the estimated time of
arrival can disrupt the entire supply chain, because the
ship has to get back in line, losing 24 hours in Suez and
up to six days in Panama, where the locks are
overloaded. To offer unfortunate captains a second
chance, last June, the Panama Canal Authority (ACP)
introduced an expensive auction system.
Because of their geographic locations, the Suez and
Panama Canals have been described as “waterways of
blue gold,” able to exert powerful leverage on the
global economy, where a company’s success depends
on increasingly fast delivery times. Canal security and
neutrality are therefore of critical importance, especially
since both were the cause or site of serious disputes
and conflicts during the 20th century.
SUEZ: DEEPENING THE CANAL TO 23 METRES
On 26 July, with violence flaring anew in the Near East,
the Egyptians formally celebrated the 50th anniversary
of the Canal’s nationalisation by President Gamal Abdel
Nasser.
In 2005-2006, the Suez Canal generated $3.56 billion
in toll revenue. Although there has been no fanfare,
this sum represents a new record, driven by rapidly
expanding trade with China and India.
Toll revenue is Egypt’s third largest source of foreign
currency, ranking just behind tourism, and has proven
to be a godsend.
Consequently, any rate increase must be personally
approved by the country’s President. The Suez Canal
Authority’s role is to ensure that these increases don’t
incite shipping companies to look for alternative routes.
During the period, nearly 18,000 vessels–40% of them
containerships–used the Canal, transporting over 640
million tonnes of merchandise. To meet the needs of
ever-bigger ships with draughts too deep to use the
current waterway, the 190-km Canal will be deepened
from 20 to more than 23 metres by 2012. Once the
project has been completed, the Suez Canal will be able
to accommodate supertankers with deadweight of more
than 250,000 tonnes, aptly called Capesize vessels.
Given its dimensions, the Canal can be used by
containerships of any size. CMA-CGM is one of the
Suez’s major customers, with 16 services transiting the
Canal: twelve lines linking Europe and Asia, two
between Africa and Asia, one joining the US and the
East Indies, and the Round The World Suez line.
PANAMA: A $5.2 BILLION CANAL
AUTHORITY PROJECT
The country’s leader since 2004, Panamanian President
Martin Torrijos is a man in a hurry.
His country’s Canal, too small for containerships in the
8,000-to-10,000-teu range, can handle only 4,000-to5,000 teu Panamax-size vessels, which account for
35% of traffic. With 14,000 vessels a year
and 279 million tonnes (Mt) which transited in the fiscal
year that ended Sept. 30, 2005, the Panama Canal is
near its maximum capacity of 340 Mt. That’s why
President Torrijos formally announced a $5.2-billion
expansion project that will significantly increase the
Canal’s current capacity. Given the amount of revenue
generated –$1.2 billion in fiscal year 2005–he fully
intends to win a favourable vote on the October 22,
2006 National Referendum about expanding the Canal,
which will ensure its long-term capacity and
competitiveness, and thus maintain this vital sea link
between Asia and the East Coast of the United States, a
route that currently accounts for 39% of Canal traffic,
versus 11% in 1999.
As of May 1, 2005 containerships no longer pay
according to their cargo capacity as determined by the
Panama Canal Authority, but on their capacity as
measured in teu, with the rate currently set at $49 per
teu. The change is being implemented over a two-year
period ending on May 1, 2007, when the rate will reach
$54 per teu. For CMA CGM, this represents an increase
of 65% in tolls (per vessel) over the past seven years.
Six of the Company’s lines currently use the Panama
Canal, which amounts to an average of 25 transits a
month, at an average cost of $190,700 per vessel.
Rates on these “waterways of blue gold” are not
negotiable, but Suez and Panama Canal authorities
make sure that their rates are fair, since sailing around
the Capes can in some cases increase tenfold the final
cost per tonne transported.
Ferdinand de Lesseps, who dug the Suez Canal (opened
in 1869) and failed in his attempt to dig the Panama
Canal, probably never imagined that, as originally built,
these two extraordinary “shortcuts” would still not be
big enough to handle all the goods flowing to and from
the Indies.
PANAMA
SUEZ
4,250 teu
$246,000
$245,000
5,100 teu
$297,000
$290,000
5,700 teu
$345,000
6,500 teu
$382,000
8,200 teu
$453,000
NEW CANALS FOR GIANT VESSELS
PANAMA – By 2014, the Canal’s 100th anniversary,
giant 5,000-to-12,000-teu vessels will be able to use
the 80-km waterway that crosses the Isthmus of
Panama.
The new locks providing access to man-made Gatun
Lake will be truly impressive, measuring 427 metres
long, 55 metres wide and 18.3 metres deep.
SUEZ – A sea-level Canal linking Port Said in the North
and Suez in the South through which convoys of ships
transit, the Egyptian waterway is not overloaded but
will nonetheless be made deeper and wider. Ships must
arrive 24 hours in advance to allow the pilot to board.
This mandatory measure enables the Canal Authority to
more efficiently manage the two convoys of southbound
vessels, which pause in Bitter Lake to let the
northbound convoy through.
Comparative costs: Panama and Suez Canals,
by containership capacity
INTERESTING FACTS:
>Panama and Suez serve as benchmarks for classifying
ships according to features and dimensions that the two
Canals can handle:
-Panamax: 294.1 metres long, 32.3 metres wide, 12
metres
draught,
57.9
metres
air
draught.
Approximately 65,000 tonnes.
-Suezmax: 17 metres draught (year round).
-Capesize: ships too big for the Panama and Suez
Canals and which therefore must sail around Cape Horn
or the Cape of Good Hope.
> Average transit time is 8 to 10 hours for the Panama
Canal and approximately 14 hours for the Suez Canal.
>On average 36 vessels a day transit through the
Panama Canal and 50 through the Suez Canal.
>The biggest users of the Panama Canal (all kinds of
traffic) are the United States (30%), followed by China
and Japan (8% and 7% respectively).
China and the Asian “dragons” are flooding Europe with
their exports via the Suez Canal.
> Containerships are the main customers, representing
around 35% of traffic for the Panama Canal and 40%
for the Suez Canal.
>The Suez Canal (16% of worldwide maritime trade)
shortens distances between Asia and Europe by 17% to
60% (23% between Tokyo and Rotterdam).
By using the Panama Canal (7% of worldwide maritime
trade), a ship shortens the route between New York
and San Francisco by more than 7,800 miles.
PANAMA :
auctions to offset overbooking
Although an average of 36 vessels a day can transit
through the Canal, as many as 80 to 90 ships may be
forced to wait. In response, the Panama Canal
Authority has launched a bidding system to help those
vessels whose owner/operator’s ranking is low (due to
relatively low number of transits) and would otherwise
not succeed in competition in Period 3.
The traditional booking system introduced five years
ago comprises three periods:
Period 1 (from 21 to 365 days before transit),
Period 2 (4 to 20 days before transit) and
Period 3 (3 days before transit).
It was modified in June to include one additional slot
(the 25th slot). The bidding normally starts at
$25,000, but under certain backlog conditions, it may
be changed to $50,000. The slot is awarded to the
highest bidder. There are no priorities whatsoever and
all interested owners/operators may participate. Last
August 24, one large tanker bid a record $220,300 for
a slot, at a time when there was a large backlog of
vessels waiting to transit.
Source: CMA /CGM GROUP MAGAZINE Fall 2006 N° 30