Pushback on Panama Canal toll hike timing

Date: Thursday, August 1, 2019
Source: American Shipper

Three groups representing 90% of shipowners say a Jan. 1 toll hike would coincide with the IMO’s low-sulfur mandate.

Shipowner organizations are expressing concern about proposed modification of tolls at the Panama Canal on Jan. 1 and are asking for it be postponed until June 2020.

The International Chamber of Shipping (ICS), the Asian Shipowners’ Association (ASA) and the European Community Shipowners’ Associations (ECSA) said that they are concerned that the changes in the canal tolls, which would go into effect the same day that the International Maritime Organization’s (IMO) regulation on low-sulfur fuel, “will have a negative impact not only on shipowners and operators but also on world trade.”

In a July 30 statement, the three groups noted the IMO regulation is expected to cost the industry an additional $30 billion to $50 billion per year and that they are also being roiled by a number of other issues, including, “higher insurance premiums due to rising geopolitical instability in some key regions; increasing economic uncertainty due to proliferation of protectionist trade measures worldwide; and ongoing escalation of trade disputes and increase in trade tariffs between major trading nations.”

The Panama Canal held a public hearing on July 24 on its proposal to modify tolls, which were first announced on June 14.

The changes vary according to the type of ships using the canal and the three shipowner organizations said, “While appreciating that charges for containerships and general cargo ships will remain unchanged, ICS, ASA and ECSA are concerned about some of the proposed toll increases for other sectors such as dry bulk (iron ore), tankers, chemical tankers, LPG and LNG carriers, PCC and ro-ros and cruise ships.” 

They added, “It appears that the proposed new tolls for the above mentioned segments would be increased by 5-15%, which could significantly undermine future trade growth.”

They said there should be no further distinction in toll charges between Panamax and Neopanamax vessels, noting specifications of vehicle carriers using the Neopanamax and Panamax locks are very similar. A Neopanamax vessel could in some cases have a shorter length overall (LOA) and shallower draft than a Panamax vessel.

They also said that the market remains difficult for the segments facing proposed toll increases, including bulk carriers and “any such increase would exacerbate the already volatile operating conditions.” However, bulk shipping rates have been improving. For example, the Baltic Dry Index, which tracks dry bulk freight rates for a variety size ships on different routes, rose from 595 on Feb. 11 to 2,191 on July 22, though it has since fallen to 1,922 on July 29. 

They also cautioned against toll increases for ships in ballast condition because of the shortage of cargoes and the need to reposition ships.

ICS, ASA and ECSA are the principal global and regional trade associations for shipowners and operators, representing all sectors of the shipping industry, including containership operators, tanker operators and dry bulk carriers, LPG/LNG carriers, chemical carriers, passenger vessels and vehicle carriers. The groups said their combined membership represents more than 90% of the world’s merchant tonnage. 

They want the Panama Canal Authority to give more time — 12 months instead of a minimum of six months — between the time when a toll increase is announced and when it goes into effect.

“As a consequence of the shorter (six-month) notice, shipping companies might still have to bear any additional costs arising from new toll charges, until the expiry of existing contracts with their respective clients,” they explained. “A longer (12-month) notice period would provide shipping companies and operators with sufficient time and room to maneuver in terms of negotiating any future contractual agreements, which are likely to be impacted by changes to future toll charges.”


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