Post-Panamax Economics on Navigable Waterways

By Harry Valentine 2013-05-01 09:05:00

The present worldwide economic slowdown had reduced expected growth in international trade and has increased competition amongst owners of post-Panamax ships. While the large ships provide cost-competitive transportation services, ship owners or operators may carry massive payloads loads at very competitive prices and operate very close “to the bottom line”. Owners/operators of a ship capable of carrying 12,000-containers may sail at a per container tariff rate where a payload of 9,000 to 10,000-containers would cover operating costs, that is, 75% to 84% break even load factor.

When sailing on the open ocean, the larger ships incur significant economic advantages over smaller ships that carry a smaller payload. Experience has revealed very little difference in the operating cost between ships built to carry 8,000 and 12,000-containers respectively. However, the larger payload capacity aboard the larger ships allows ship owners to offer lower transportation rates-of-tariff per container to their customers, than owners of smaller ships. Hence, owners and operators of big ships gain a larger portion of the international container transportation market.

While most international ports are located on the ocean or inside a large bay, other international ports may be located along a navigable inland waterway. Examples include Hyderabad, Hanoi, Calcutta, Dhaka, Nanjing, Hamburg, Rotterdam and Cairo. Several navigable rivers offer sufficient navigation depth upstream of the river mouths, to allow passage to post-Panamax size of vessels. Examples include a section of the Ganges River with a draft of 52-ft (16m) for several miles upstream of its mouth, the Danube River for several miles upstream of the Black Sea and even sections of rivers elsewhere across Asia and in South America.

There are navigable waterways such as the Nile, Lower Parana and Lower St Lawrence Rivers that can accommodate the fully laden navigation draft of the earlier generation Panamax ships, but not the fully laden draft of bigger post-Panamax vessels. Many older ports also have insufficient draft to accommodate the full-load draft of these large ships. There may be scope to dredge or even deep-dredge the harbors of some older ports. An alternative strategy may be to partially off-load a post-Panamax ship at a deepwater seaport before sailing partly laden to a nearby shallower draft port with a large population.

Such factors as sailing distance to the next port, the number of containers on board and availability of competitively priced alternative transportation services would determine the feasibility of sailing a partly laden post-Panamax ship to a smaller port. If 3,000-containers are off-loaded from a container ship arriving with 12,000-containers on board, it may be feasible to sail a distance of perhaps 250-miles (400-kms) carrying 9,000-containers to the next port. If the super ship is required to sail carrying 5,000-containers, that is, less than the break-even amount, local governments may need to offer a subsidy or local barges carry the containers.

While it may be possible to sail a partially laden post Panamax ship up the Parana River to the Port of Rosario (34-feet or 10.4-m draft), the economics of sailing the large ship carrying 3,000 to 5,000-containers would be unfavorable. If local authorities were unable or unwilling to subsidize the big ship’s voyage to Rosario, then it would be more feasible to transfer containers to barge-tows at the Port of Buenos Aires to sail the 275-kms (170-miles) to Rosario, even if the Port of Rosario included enlarged docks that could accommodate the world’s biggest container ships.

Throughout maritime history, large river port cities have over time lost their status and as international maritime ports as vessel size increased and were no longer able to navigate local waterways to gain direct access to such ports. At Panama, there has been opportunity to enlarge the main navigable waterway to allow passage to the largest container ships afloat. In this modern era of electronic telecommunications and interlined intermodal freight transportation services, business and commerce will continue ‘as usual’ at former main inland river ports that are off-limits to fully laden large oceanic ships.

The interlining between the largest oceanic carriers and local inland vessels at a protected ocean port has long assured the economic viability of inland port cities such as Memphis, St Louis and Cincinnati in the USA, also Vienna, Nurnberg, Belgrade and Budapest in Europe. Much evidence is available internationally of successful interlining of oceanic and inland vessel at the ports of Buenos Aires, Shanghai, Rotterdam and Buenos Aires. However, a few cities internationally may actually build docks on inland waterways able to berth partly laden post-Panamax ships, perhaps to achieve a local political purpose.

The economics of sailing a partly laden super ship along an inland waterway is at best, questionable in times of “thin profit margins”. When sailing through a draft of 12-metres (40-ft) carrying 8,000 or 9,000-containers (66% to 75% load factor), the ship may achieve a small measure of viability. On the other hand, it would not be feasible to sail a post-Panamax ship 1000-miles along an inland waterway of about 10-metres (33-ft) navigable draft and perhaps carrying 4,000-containers. The ships would ‘ride-high-in-the-water’ and operate at greatly reduced efficiency, perhaps with the propeller even breaking the water surface.

For purely political purposes, some regional or national governments may actually want to have sparsely laden post-Panamax ships sail a considerable distance through the shallow draft of an inland waterway. At some locations, authorities may actually provide a subsidy to occasionally entice some ship owners to oblige and accommodate such a spectacle. Upon arrival at a perhaps historical inland port, the ship’s crew may be feted at a civic reception where local and regional political dignitaries may make speeches attesting to their town’s status as an international transportation and commercial centre.

Harry Valentine is a frequent contributor to the MarEx e-Newsletter and can be reached at harrycv@hotmail.com.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.