Panama Canal Expansion Impact on Traffic and Transshipment

Asaf AsharNational Ports & Waterways Initiative, USA

Independent Consultant

TOC Americas 2015

www.asafashar.com

“Traditional” T/S Forecast Model

• T/S = Regional Traffic x T/S Incidence• Agree: Regional Traffic = f(Regional GDP)

No/Slow Growth • But Assume: T/S Incidence = f(Ship Size, Port

Constraints, Alliances) Dramatic Growth • Because Larger Ships Fewer Services, Less

Direct Call, Port Constraints; Alliances Market Power to “Abandon” Ports

• So why T/S Incidence Worldwide is “Stuck” at 30%?

Actual Effect of Ship Size & Alliancing• Direct Calls to More Regions (Baltic) and More

Ports (Baltimore: Evergreen brings CKYH lines; MSC brings Maersk; G6 to follow? 2M: 799 1,036 port-pairs)

• Direct Calls at Adjacent Ports (Charleston + Savanna; Norfolk + Baltimore)

• Port Constraints? 9,300-TEU already in 42-ft Savanna; Near-Future deepening of US ports, Moin, Mariel, Veracruz…

• Forecast based on “Incidence” is too general! Need detailed analysis of Service Patterns

• My analysis focuses on Additional Traffic and T/S

Main Regional Service PatternsCross-Canal Services (“Horizontal”)

Asia / ECNAAsia / GCNA

Cross-Canal Services (“Diagonal”)

WCSA / Europe WCSA / ECNA

Non-Canal Services (“Vertical”)

ECSA / ECNAECSA / GCNAAsia / WCSA “L”

Asia / WCSA ”L”

Ashar 2015

Consolidation:ParallelIntersectionGlobal

Parallel: AWP Consolidation (CKYHE)

4,400 + 4,500 = 8,900 TEU 4,300 + 4,250 = 8,550 TEU

AWH: 10 x 4,400 TEU AWC: 9 x 4,500 TEU AWY: 8 x 4,250 TEU AWS: 9 x 4,300 TEU

Hanjin, Ashar 2015

Canal Traffic: Transshipment:

“Abandon” Ports (Wilmington, Boston)? Add Ships (11), Speed (20k)? Add Ports (Halifax, Miami, NOLA, Jax, Mobile, Cartagena)?

24 Asia/N Am = 17 USWC+ 6 AWP + 2 AWS; 3 CCT Stops4-5

1

Parallel: Eurosal Consolidation (HPL/CMA/HSD)

3,700 + 4,200 = 7,900 TEU

7,900 + 2,500 = 10,400 TEU

Hapag Lloyd, Ashar 2015

SW1: 10 x 4,200 TEU SW2: 8 x 3,700 TEU SW3: 6 x 2,500 TEU

Canal Traffic:Transshipment:

“Abandon” Ports (Guayaquil, Paita)? Hubs in Panama or WCSA?

Intersection: Asia/ECNA + Asia/WCSA

• Massive T/S; but• Add Time to Asia/Mexico

and Asia/WCSA• Different Line Groupings• Limited/No Scale

Economies• Balancing Flows Difficult• High Reefer Content

Asia / WCSA

Asia / ECNA

• Limited Prospects

Canal Traffic: Transshipment:

Feeder

Intersection & Global ConsolidationCross-Canal Services (“Horizontal”)

Asia / ECNAAsia / GCNA

Cross-Canal Services (“Diagonal”)

WCSA / Europe WCSA / ECNA

Non-Canal Services (“Vertical”)

ECSA / ECNAECSA / GCNAAsia / WCSA (“L”)

Asia / WCSA ”L”

Canal Traffic:Transshipment:

Hapag Lloyd, Ashar 2015

Fourth Revolution

Summary Observations• Regional GDP (Venezuela; Ecuador) – No Change T/S• Parallel Consolidation -- Modest Growth T/S– AWP Diverts AWS/IM: Traffic UP; T/S No Change– Diagonal Services: Traffic No Change; T/S Up; WCSA Hubs?

• Intersection Consolidation -- Massive Growth T/S -- Long-Term (if ever)

• Special Factors– Alliance Concentration (2M/Moin; O3/Kingston) – Add/Eliminate Direct Calls (Cartagena, Houston, Veracruz,

Moin, Mariel)– Add/Eliminate Specialized Services (CKHYE AWT; CMA PEX2)

Contrarian Views

• “Double digit jump in Panama transshipment activity as a result of the opening of the expanded canal in 2016” (Drewry)

• “(Expansion) will boost the need and demand for transshipment and create opportunities for existing Caribbean hubs and the development of new ones” (World Bank)

• “Growth in transshipment is inevitable, competition will be tough, Panama is key, Go for it” (Worley Parsons)

• “(Expansion) increases Panama Canal’s traffic by 15-20% due to recovering Asia/N America trade, but will only result in small growth (5%) in regional transshipment“ (Ashar)

Thank You!Asaf Ashar

National Ports & Waterways Initiative, USAIndependent Consultant

TOC Americas 2015

www.asafashar.com