In January 2017, we looked at how panamax containerships were being withdrawn from Far East – North America East Coast services routing via Panama as a result of the expansion of the Panama Canal. In that article we reported that during the fourth quarter of 2015, there were 144 vessels of 3,000-4,999TEU deployed on the Far East – North America East Coast trade lane and that in the fourth quarter of 2016, 23 of the 144 vessels were still deployed on the same route while 61 were cascaded to other routes. Of the remaining 61 vessels, we estimated that 15 were scrapped while as many as 46 were laid up, with the latter accounting for some 32% of the overall capacity deployed on these routes in 2015Q4. In 2016, the industry had been experiencing a high number of panamax scrappages as owners were unable to fix vessels to charters. However, in 2017 the trend in the amount of scrapping has reversed, with the number of Panamax vessels sold for scrappage decreased by 90% in 2017Q4 compared with 2016Q4, as indicated in the following figure. Scrappage prices have increased in the same period from around $325 to $430 per ldt, however so too have charter rates, in part influenced by the reduction in vessel numbers.
Figure 1: Panamax containerships scrappages and charter rates, 2016Q1-2017Q4
Source: MDS Transmodal Containership Databank, December 2017 & MDS Transmodal elaboration on VHSS
+Panamax vessels- capacity between 3,500 & 5,000teu.
Figure 1 also shows that charter rates for the Panamax containership sector have increased by 43% from 2016Q4. Coinciding with the increased rates is the news that Maersk has fixed the charters of 22 panamax vessels. Whilst 2017Q3 has experienced a decrease in rates, the expectation for the coming months is for rates to increase as the industry becomes more consolidated.
The number of inactive Panamax vessels has reduced by 54% between 2016Q4 and 2017Q4 globally. Newly established services such as MSC’s Petra Express, which operates on the Far East – Red Sea trade, have begun deploying Panamax sized containerships, taking advantage of the depressed rates earlier in 2017. Additionally, Panamax vessels have also found a home in the Intra-Asia trade lanes where these vessels have increased by over 30%.
However, with over 80 ULCS (Ultra Large Container Ships) due for delivery in 2018, it seems likely that the number of Panamax vessels deployed in the coming months will experience a decline. The new ULCS will replace vessels of 6-10,000teu which through cascading would likely replace the panamax vessels.