Slow steaming is a good way to save on fuel costs and meet the new IMO requirements. So ships have slowed down. But I was amazed at the graph below, showing a trend for quite a while.
Slowing down is an important way of cutting CO2 emissions from fuel oil. It also implies that more ships are needed to meet planned sailings on a scheduled route. It’s a deliberate reduction of individual ship ‘productivity’, since fewer paid cargo-carrying trips can be made in a year. But it may be a better fit with the demand for shipments right now, and it might result in fuller vessels.
We should remember that slow steaming will not eliminate CO2 emissions problems; it’s a stopgap at best. New types of power with very low or zero emissions through their life cycle well-to-wake must be developed. The investments have to be made.
The drought in Panama has reduced water in the canal. Panama has imposed draft limits on ships. Large container ships sometimes need to offload cargo on one side and have it sent by rail to the other side.
Waiting lines of ships have built on each side of the canal, waiting to traverse it. The delays can be up to 5 days at present, according to the data from eeSea, a forecasting and scheduling company based in Copenhagen, Denmark.
These delays are already causing ships to avoid the canal by using the Suez Canal or even sailing around the Cape of Good Hope to get to Asia. These are much longer routes, but do not have delays. If the issues continue, cargoes will begin to be diverted at the start. That will be bad news for East Coast US ports.
Update: the second article below indicates that ships waiting are in the hundreds, but not as high as some have reported. It’s still a big loss of business for the Panama Canal.
We all know now that the Panama Canal is suffering from a lack of water, due to a prolonged drought. The result is limits on draft of ships traversing it. The Canal has also raised rates recently. So shippers are looking for alternatives.
Just remember that the canal was getting increased use as shippers migrated from US West Coast ports, and started using East Coast ports. The trip is a lot longer in time, but if there is a disruption danger at West Coast ports, it makes some sense. Over the COVID period, East Coast ports such as Savannah and the Port of Virginia have made major investments in inland infrastructure to support better distribution of goods inland. Of course Houston is also a very good port to reach from the Panama Canal and has significant container capacity.
Now we see some results from the merger of the Kansas City Southern railroad, formerly a US Class I line, and the Canadian Pacific (CP) railroad. The new line has significant capacity in Mexico which the KC developed on its own for some years. This new route will allow shippers to send cargo to Lazaro Cardenas in Mexico, a West Coast Mexico port, to Houston or north to Chicago. The route from Asia is longer in time than the US West Coast ports, but days shorter than the East Coast ports, and with excellent penetration to the Central US areas around Chicago and Kansas City.
I think this is a good marketing strategy for the CPKC railroad. Another West Coast port could well get a steady stream of container cargoes. The route would be less sensitive to West Coast US disturbances such as strikes, and less dependence on the BNSF and UP rail systems, both of which are under fire for scheduling issues, and are known to be a bit light on staff, according to recent reports from their various craft unions.
However, when there are no disturbances, the West Coast ports of Los Angeles and Long Beach are still the fast and dependable way to get cargoes into the central US. They are also good fast ways via the land bridge to get cargoes to Europe by transshipping again from the East Coast ports such as New York.
If the West Coast ports can keep on an even keel, I think their efficiency will attract back a good chunk of the trade they lost due to the strike. Trade of all kinds is down, but it’s still considerable.
Supply Chain and Logistics 