News / Panama Canal answers Nicaragua project with reduced tolls and a loyalty scheme

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Competition for container shipping in the Americas is gearing up as the Nicaragua canal project formally got under way last month.

However, almost in response, the Panama Canal Authority (ACP) announced approval for the construction of a new container terminal and a reduced toll structure for liner operators next year.

ACP announced the toll levels with request for comments – with a 9 February deadline. The tolls are due to be introduced in April 2016, coinciding with the formal launch of the expanded canal, and will also do away with its previously obscure Panama Canal Unit Measuring System weight/volume-based method of charging, to be replaced by a per teu method.

In addition, the ACP is also set to introduce, for the first time, a loyalty scheme for container shipping lines. It said: “Frequent container customers will receive premium prices, once a particular teu volume is reached.

“The proposed tolls include significant reductions in the capacity-based charge, and price differentiation based on vessel size ranges. With this framework, the ACP shares with its customers the risks associated with fluctuating economic conditions and lower-utilisation return voyages.”

According to liner shipping analyst Andy Lane, partner at CTI Consultancy, one of the most important changes in the new toll structure is the varying levies on laden and empty containers.

“Reducing the cost per ship capacity, whilst increasing the cost per laden – revenue-generating – containers carried means that costs for the carriers relate closer to their revenues. So that is very positive,” he told The Loadstar.

Mr Lane has performed some preliminary calculations on what the new charge structure will mean for container shipping lines. For the current panamax-sized vessel, which is around the 4,600 teu, there is likely to be very little difference, he argued.

Assuming an 85% [laden containers] utilisation rate on the eastbound headhaul leg, and a 30% utilisation rate on the backhaul leg, Mr Lane calculated the new tariff would represent a $12,000 round-trip cost saving, equating to $2 per laden teu and a 1.72% reduction.

However, when the expanded canal is able to take ships of up to 11,000 teu, he argued, the economies of scale afforded by the bigger ships could have a real impact on carriers’ operating costs.

“Although the total toll for neo-panamax will be significant, the unit costs are lower than panamax. What that means is that for an 11,000 teu ship – again with 85% headhaul and 30% backhaul laden container utilisation – the cost per laden teu on a round-trip basis will be $12 less, or 9.2% lower than for a 4,600 teu vessel with corresponding utilisation,” he said.

In addition to the proposed lower transit costs, it would appear that liner operators are also set to see more options for transhipment and cargo switching at the waterway, after the ACP announced that it has approved plans for a new 5m teu transhipment facility at the Corozal area, adjacent to the Miraflores locks.

The plan has drawn considerable criticism from Hutchison Port Holdings, operator of the nearby facility at Balboa, which has long been trying to acquire the area to expand its own facilities. However, ACP said should the project go ahead – it still requires formal approval by Panama’s National Assembly – it would look to concession the site to an independent operator for a 20-year period, with a likely option to extend for a further 20 years.

Under the current concept, the port is expected to feature 2km of quay with a depth alongside of 18 metres and an access channel 16.3 metres deep.

ACP administrator Jorge Luis Quijano said: “Advancing the terminal in the Corozal region is a priority. It is part of the Panama Canal’s goal to explore and develop areas, products and services that are close to our core business, and that add substantial value to our customers as a one-stop gateway with multiple services.

“This new facility will result in a significant increase in inter-oceanic cargo traffic, enabling the canal to add value to the route and customers, consolidate Panama’s position as an international logistics and maritime hub.”

Meanwhile, although considerable scepticism in the international shipping community remains over the feasibility of the Nicaragua Canal, the project’s developer, Wang Jing, chief executive of Chinese firm HKND, appeared on Nicaraguan television shortly before Christmas and announced its schedule for this year.

Nicaraguan president Danial Ortega (left) with HKND chief executive Wang Jing (right)

In the first quarter of 2015, he said, the group would continue measuring, design, land acquisition and construction of access roads on the eastern side of the proposed canal.

It would also hold the tender for the preliminary design, while at the same time measuring, design, land acquisition and construction of access roads will begin on the western side.

Mr Wang continued: “At the end of the first quarter of 2015, we will deliver the final and integrated report of environmental impact studies. In the third quarter of 2015, bidding and start of working on the key excavation section between Tule and La Union.

“In the fourth quarter of 2015, tender for design and construction (EPC contracts) of the east and west locks,” he said.

According to Reuters, Mr Wang has also outlined the possibility of preparing HKND for a stock market listing to raise funds for the $50bn project. More recent estimates by port consultants interviewed by The Loadstar have put the project’s costs as high as $100bn.