Browse by Tag

International Shipping & Freight Forwarding Blog

Current Articles | RSS Feed RSS Feed

Suez or Panama Canal – Which Route Lowers Your Ocean Shipping Costs?

 

Ocean ShippingThe Journal of Commerce calls this “one amazing race”, referring to the competition between the Suez and Panama Canals for ocean shipping contracts. While larger, more fuel-efficient ships traversing the slower Suez Canal route can carry a great deal more cargo at a lower slot cost, (the cost in getting a ship from one port to another), many freight shippers are choosing the Panama Canal route because they can take advantage of faster shipment of their merchandise, even though the cost may be higher in the long run.

Suez Canal vs. Panama Canal

The introduction of new Suez services from Asia to the U.S. East Coast isn’t causing an immediate shift of carrier contracts away from the Panama Canal, as ocean shippers are watching and waiting to determine whether the rates and transit times liner companies offer for these new services will produce sufficiently lower overall slot costs to compensate for the slower transit time afforded by the Suez Canal route.

Slot costs vary from carrier to carrier and from one voyage to another, and depending upon a number of variables, these costs can change even from one day to the next. Ocean freight carriers closely monitor slot costs in their attempts to set compensatory freight rates. A typical slot cost is comprised of the following elements:

  • Duration of the voyage
  • Owned ship financing or charter hire
  • Fuel costs
  • Crew costs
  • Food for the crew
  • Hull insurance
  • Tolls for the canal
  • Pilot fees
  • Tugboat costs
  • Dockage fees

Canal tolls are higher at the Suez Canal, which generally leads to additional surcharges as carriers pass these extra costs along to ocean shippers. A container ship paying a toll of approximately $450,000 at the Panama Canal could pay as much as $480,000 in Suez Canal tolls for the same cargo. This is in addition to other indirect costs charges by the Suez Canal route, such as the cost of war-risk insurance some shippers pay for cargo transiting the pirate-infested Gulf of Aden and the risk that political unrest in Egypt could impact canal operations. Furthermore, The Suez Canal tolls increased by 2-5% on May 1st, adding even more to the overall shipping costs for that route.

The Panama Canal Authority exempted container ships from the toll increase it imposed late 2012, but it is currently in discussions about the structure of a new set of tolls it plans to introduce in 2015, when it is slated to open a new set of larger locks that will be able to accommodate larger container ships to commercial traffic.

Although the Suez Canal has increased tolls, many carriers utilize that route because profitability is less feasible on ocean service from Asia to the East Coast via the Panama Canal, given that the larger, more fuel-efficient carriers travelling the Suez Canal route can save on fuel costs and carry more cargo in each shipment.

Overseas CargoThe decision comes down to whether the slower shipment through the Suez Canal at higher slot costs will ultimately be less costly than the faster Panama Canal route, which as yet cannot accommodate the larger cargo ship size capacity.

If your business or corporation relies on ocean shipping carriers to export merchandise to retailers and consumers, this topic is of great interest to you, as ultimately the costs associated with ocean shipping will trickle down to you. Stay tuned for updates and developments on the “amazing race” between the Suez and Panama canals, and how the outcomes will impact your business’ ocean shipping costs.

At ETC International, our overseas shipping network has been serving companies in need of commercial and industrial cargo transport, both domestic and internationally, since 1984. With nearly 30 years experience in ocean cargo transport, we have an expert understanding of all the ins-and-outs of commercial shipping. As a result, we are able to provide invaluable information to our commercial clients to help them make the most of their shipping dollars. We possess the know-how, so you don’t have to.

We are happy to start by providing a no-cost, hassle-free rate quote on ocean shipping for manufacturers, retailers and wholesalers. From there, we can discuss additional considerations of the shipping process, so your business can start shipping goods to paying customers right away!

Comments

There are no comments on this article.
Comments have been closed for this article.

Write a New Article!

3/8/2012

 

News from JOC

Intermodal Shipping: Building a Better Intermodal Ride 
Maersk Line and BNSF offer day-definite intermodal delivery from Los Angeles to five inland destinations

Logistics: Helping Shippers See More Clearly 
New technologies help take the guesswork out of the supply chain, keeping goods and cash flowing

Trucking: The Road to the Ocean 
Solidly profitable LTL trucker ODFL is expanding its drayage operations, with an eye on the trans-Pacific

Maersk Vows to Defend Market Share Gains 
Maersk Line will not allow its renewed focus on profitability rather than cargo volume to eat into the significant gains in market share it achieved in 2011, the carrier said on Monday.

Cosco, China Shipping Consider More Vessel Sharing Pacts 
Cosco Container Lines and China Shipping Container Lines are looking to expand their vessel sharing agreements on China coastal and intra-Asia trade lanes to other routes, said Capt. Wei Jiafu, chairman of the Cosco Group.

Truck Volume Forecast to Grow 3.9 Percent in 2012 
The trucking industry will outperform the U.S. economy this year, with truck freight growing 3.9 percent, greater than overall GDP, according to FTR Associates.

Asia-Pacific Airlines' Freight Traffic 
Asia-Pacific based airline traffic in calendar 2011 declined 4.8 percent year-over-year as freight capacity inched ahead 0.1 percent. In contrast, January 2012 traffic plunged 13.7 percent and capacity declined 5.3 percent. The calendar 2011 cargo load factor was 66.6 percent, off 3.4 percentage points year-over-year, while January's cargo load factor was 65.3 percent, off 5.7 percentage points year-over-year.

UASC Seeks Second GRI on Asia-Europe Trade 
United Arab Shipping joins other major ocean carriers in seeking a second general rate increase this year on the troubled Asia-Europe trade lanes.

Chinese Manufacturing Expands on Export Order Rise 
Chinese manufacturing in February expanded at the fastest pace in five months, as export orders surged after a production lull caused by Lunar New Year celebrations.

Indonesia Poised for Major Logistics Growth  
Indonesia will see rapid growth in logistics demand this year but needs huge investment in transport infrastructure to realize its true potential, according to one leading analyst.

Saudi Airlines Cargo to Fly to Saigon 
Saudi Airlines Cargo will launch a twice-weekly B747 freighter service to Saigon, Vietnam, on March 25, linking the Southeast Asian country to the Middle East and Frankfurt, Germany.

 

Subscribe via E-mail

Your email:

Latest Posts

Follow Me