Ship-owners up in arms at Panama Canal toll hike.

'Simply unacceptable,' ICS says

The International Chamber of Shipping (ICS)- an association of ship-owners representing more than three quarters of the global merchant fleet- has lambasted the Panama Canal Authority's (ACP) plans to hike canal tolls, calling for an immediate rollback of the hike recently announced and a six month notice period made mandatory before any future hikes come into effect.

ICS Secretary General Peter Hinchliffe told the ACP in a letter that the hikes announced last month were 'simply unacceptable' and that there was no pressing need for the 15% increases proposed, given that ‘canal revenues are currently very healthy’. The ACP had earlier reassured the industry- in January this year- that there would be only one small 'adjustment' before the expanded Panama Canal opens in 2014. 

“While the ACP proposal analyses the impact of the toll rises on the competitiveness of commodity trades, no account is taken of the impact on shipping companies themselves, many of whom are still forced to run ships at a loss in order to remain in the market,” he said. Hinchliffe added that although the canal was an important Panamanian asset, it was also international public infrastructure crucial to the smooth operation of the global supply chain and should ‘take this important public role into account when setting tolls’. 

 “We therefore request that the ACP rescind the current plans for increases in the next two years and concentrate on developing a toll structure that can be to the benefit of all parties to be introduced in late 2014.” 

The ACP had announced toll increases effective from the first day of July. Segments affected include the following types of vessels: General cargo, container/break bulk, dry bulk, tanker, chemical tanker, LPG, vehicle carrier and ro-ro, and 'others'. Left unchanged for the moment were container, reefer and passenger vessels, and smaller vessels would be charged depending on their length. ACP Administrator Alberto Zubieta had commented, "This proposal continues to align the Panama Canal tolls to the value, benefit and quality the route provides, and maintains the competitiveness of the Panama Canal." 

The timing of the statement from the ICS is interesting, coming soon after ACP's public hearing that concluded at Panama on May 23. As part of the tolls adjustment process, the ACP had laid down a consultation period from April 20 - May 21, 2012, during which the Authority was to receive comments, opinions and requests from all stakeholders. 

 The ACP claims that the changed tariffs are meant to align Canal toll charges with the value provided. Observers have noted that the number of 'segments' have now been increased by the ACP, with eleven planned: full container, reefer, dry bulk, passenger, vehicle carrier and ro-ro, container/breakbulk, tanker, chemical tanker, LPG, general cargo and others. 

The strong response from the ICS to the toll hike shows that ship-owners are feeling the squeeze of rising costs and dropping demand in today's economic climate, experts say. As proof, they point out that ICS has called the Authority's plans to increase canal charges "rushed, excessive and likely to cause further problems for shipping companies" given the fragile state of economic recovery.