Shipping industry comments on Panama Canal toll rise proposal

Aug 02 2019

The Panama Canal Authority (ACP) is conducting a public consultation on its proposal to adjust the canal tolls for all types of vessels.

New toll charges are due to enter into effect on 1st January, 2020, the same day as the IMO ‘Global Sulfur Cap’ regulation. 

A submission has been forwared to ACP from the global shipping industry – the International Chamber of Shipping (ICS), the Asian Shipowners’ Association (ASA) and the European Community Shipowners’ Associations (ECSA).

They noted that the period between the publication of the proposed modifications and their date of implementation is six months, which is in line with requests made by the industry during previous toll consultations. 

However, the organisations have asked the ACP to adopt a 12-month prior notice period instead.

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 warned.

A longer (12-month) notice period would provide shipping companies and operators with sufficient time and room to manoeuvre in terms of negotiating any future contractual agreements, which are likely to be impacted by changes to future toll charges.

The proposed timing for implementation of the new toll charges is also significant for the global shipping industry, as they are anticipated to enter into effect on the same day as the IMO 2020 ‘Global Sulfur Cap’ regulation. The collective compliance costs are expected to range between $30 bill and and $50 bill per year.  

Fuel is already by far shipping’s greatest cost and the significant increase in bunker costs that is anticipated, as a result of the switch to low sulphur fuels, required by the IMO regulation, will have profound effects on the economics of shipping and the future structure of the industry.  

This is compounded further by uncertainty surrounding worldwide availability of compliant fuels, meaning that ship operators have so far been unable to properly budget for the likely spike in fuel costs or inform their respective customers about the extent of potential increases. 

As a consequence of this uncertainty, an additional bunker price spike is also anticipated during the initial period of implementation, the organisations said.

As a result, the shipping industry has expressed concern that the implementation of the new toll charges on 1st January, 2020 – the same day that the IMO regulation takes effect – will have a negative impact not only on shipowners and operators, but also on world trade.

This is especially pertinent at a time of heightened concerns about several issues affecting the industry, including:

• Higher insurance premiums due to rising geopolitical instability in some key regions;

• Increasing economic uncertainty due to proliferation of protectionist trade measures worldwide;

• Ongoing escalation of trade disputes and increase in trade tariffs between major trading nations. 

These concerns are expected to continue to have a negative impact on the global shipping industry in 2020. For these reasons, ICS, ASA and ECSA requested that the ACP at the very least postpone the timing for implementation of the proposed new toll increases by at least six months to June, 2020.  

The organisations said they continued to be fully supportive of the need for economic sustainability of the Panama Canal. However, it is equally important that the ACP fully considers and takes account of the very challenging economic conditions under which the global shipping industry is currently operating, noting that the economic sustainability of the Panama Canal is inextricably linked to that of shipowners and operators that use the canal. 

ICS, ASA and ECSA also expressed concern about some of the proposed toll increases for sectors, such as tankers, chemical tankers, LPG & LNGCs.  

It appeared that the proposed new tolls for these segments would be increased by 5-15%, which could significantly undermine future trade growth.

The global shipping industry representatives suggested the following:

• There should be no further distinction in toll charges between Panamax and Neopanamax vessels. 

• The market remains difficult for the segments facing proposed toll increases and any such increase would exacerbate the already volatile operating conditions. 

• Due to the shortage of cargoes and the need to reposition ships, the global shipping industry would urge extra caution against toll increases for ships in ballast conditions.

In the case of tankers and others, the ACP appeared to be proposing significant increases to toll charges to use the Neopanamax locks.  


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