Maersk Line switches boxship routes via Suez instead of Panama

Rising Panama Canal tolls and economies of scale have prompted Maersk Line- the world’s biggest container shipping company- to decide to stop using the Panama Canal and sail its ships through the Suez instead, media reports say. This decision will mean that there will be an upheaval in the segment in the Asia- US East Coast route, industry observers point out. 

Maersk CEO Soren Skou made a statement in Singapore confirming the development earlier this month: he said that the last Maersk container sailing through Panama will be on April 7, followed within a week by the first sailing through the Suez. Skou said that Maersk’s larger ships will carry 9000 TEU through the Suez at a time, and the logistics will be considerably cheaper than sending two 4500 TEU ships through the Panama Canal. 

 “The economics are much, much better via the Suez Canal simply because you have half the number of ships,” Skou said. “One of the reasons for why this is happening now is that the cost for passing through the Panama Canal has gone up. At the end of the day, it comes down to cost.” Maersk finds it is more cost-effective to send larger ships through the U.S., even if it meant the ships need to sail longer, he added. 

The Egyptian authorities say that the number of container ships passing the Suez Canal dropped 12 per cent to 6,332 in 2012. Conversely, the Panama Canal showed a small increase in the number of container ships that it serviced. Skou told Bloomberg that the China-US East Coast distance via the Suez is about 5% more than through the Panama Canal. From Singapore, however, the Suez route is actually shorter.

Analysts point out that time is of lesser importance in an era where all the major shipping companies are slow steaming their ships to control costs. With mammoth 18000 TEU container ships coming into the market over the next few years, more and more companies will find it cheaper to ship goods through the Suez instead of Panama, which has tripled its rates in the last few years to almost $450,000 a crossing for a 4500 TEU boxship. This may have been in anticipation of increased demand with the Panama Canal expansion project set to be finalised in two years from now; however, Panama is now finding out that it risks losing business. 

It is clear that, with pressure on freight rates set to continue, the Panama Canal authorities- and maybe even some US East Coast Ports- may find that they have to realign their business plans with new realities. Whether Maersk will use the Panama Canal after the expansion will depend on the economics, Skou said, in a telling statement. 

“The practice of using bigger ships through Suez Canal rather than Panama Canal will likely be followed by other carriers,” said Bonnie Chan, a Hong Kong-based analyst at Macquarie Group Ltd, quoted in Bloomberg. “This gives shipping companies a bit more flexibility in managing capacity.”

The legendary Sunstone- found at last?

Researchers say this crystal proves fabled Viking sunstones really did exist. (© Alderney Museum)

One report says it is something out of an Indiana Jones movie. The discovery that the crystal- first found aboard a British shipwreck off the Channel Islands thirty years ago- may be the fabled Icelandic ‘sunstone’  which helped Vikings navigate even in overcast skies far away from land. Researchers say that the discovery may be proof that the Viking sunstones really existed. Others have long suggested that the reason no sunstones have been found in Viking burial sites was because they cremated their people, thus destroying the crystal.

It is believed that the sunstone, because of its polarising and refracting qualities, helped the Vikings to follow the azimuth of the sun with remarkable accuracy. The crystal has been mentioned in the inventories of monasteries and churches, and in Viking folklore.  

Because of the rhombohedral shape of calcite crystals, "they refract or polarise light in such a way to create a double image," explains Mike Harrison of the Alderney Maritime Trust. This means that if you were to look at someone's face through a clear chunk of Icelandic spar, you would see two faces. But if the crystal is held in just the right position, the double image becomes a single image and you know the crystal is pointing east-west, Harrison said.

The sunstone found now (see pic above) was from the Alderney, a British warship that sank in 1592; scientists say that the substance is made of clacite. Physicist Guy Ropars says in ‘The Independent” that the crystal “could really have been used as an accurate optical sun compass as an aid to ancient navigation. It permits the observer to follow the azimuth of the sun, far below the horizon with an accuracy as great as plus or minus one degree.” 

Researchers have long believed that the magnetic compass was not fully understood by European seafarers until the end of the 16^th century, even though it was introduced in the 13th; the sunstone may have been a good addition to the navigational armoury, and may have been in use even well after the magnetic compass was invented. The fact that the sunstone was found near navigational dividers suggests that it was still in use.

"In particular, at twilight when the sun is no longer observable being below the horizon, and the stars still not observable, this optical device could provide the mariners with an absolute reference in such situation,"  researchers said in a publication. 

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Future shock to VLCC’s- the order book.

Analysts are warning VLCC owners that the coming year will likely be extremely tough for them. One, Poten and Partners- broker and commercial advisor for the energy and ocean transportation industries- has just issued a report saying that the VLCC market is set for another dismal year, with time charter rates already well below break-even levels of around $28,700. This, Poten says, is despite the fact that new build prices have fallen to $90MM. Meanwhile, “TD1 spot rates have fallen into the teens, while other Baltic VLCC routes have also dropped precipitously in the new year,” the consultancy noted, warning that with order books growing on the back of speculation, owners need to be extremely cautious.

In a separate report, Drewry Maritime Research says that "the impact of falling rates has been amplified by bunker prices rising in line with international crude prices.” Drewry seems slightly optimistic about the near term, though, saying that Asian demand- from India, China and the Far East- will support the market somewhat and drive growth in oil movement between the Middle East and West Africa, which should boost the tonne-mile demand for tankers. 

Poten admits it has been taken by surprise by the recent mini-revival in VLCC new build ordering. “There have been a few notable orders of VLCCs thus far in 2013, and in a move that we did not previously foresee materialising this soon, the VLCC order book has begun to rebound, reaching 83 vessels or approximately 13.5% of the total fleet size,” its report says. “Still, the question remains: why do large-scale orders continue in the face of persistently dismal earnings? The desire to “buy low” and be prepared for a scenario in which rates recover is enabled via continued credit extension by export-import lending entities controlled by governments that may view shipbuilding demand through the lens of domestic employment”. 

A case in point: an official of the EXIM Bank of China told Reuters recently, “No matter if the market is good or bad, as a policy bank we will continue our efforts in providing more support for the (Chinese) shipping sector”.

Such expedient national policies may actually harm unwary shipowners, analysts warn. "It is necessary for owners to be extremely disciplined in order for the hangover of the last decade’s vessel procurement to subside and for the supply/demand dynamic to reach levels that support more robust earnings,” Poten says, warning that deliveries will pick up later this year and, given the flat demand, will hurt the market whose macro indicators and crude demand graphs do not appear to be encouraging. 

“Forecast utilisation levels and associated time charter rates would likewise be negative for earnings in the spot market as the two are closely correlated" Poten says, concluding with a warning: ".. Owners, drawing on their experience of the boom years that have followed previous busts, view the current earnings environment as an opportunity to be well-positioned for the next cycle by having a larger fleet in a higher margin environment. This has the potential to become self-defeating… owners should be wary of speculative purchases.”

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Pratibha Shipping’s Pawar brothers arrested.

Four months after the tanker ‘Pratibha Cauvery’ beached off Chennai’s Elliot’s beach, two of the directors of Pratibha Shipping have been arrested in Pune. Chennai Police confirmed that brothers Madan Anand Rao Pawar (55) and Suresh Anand Rao Pawar (53) were arrested on charges of culpable homicide not amounting to murder. Two other directors of the company are believed to have been granted anticipatory bail.

Pratibha Shipping has been widely accused of negligence that caused sailor deaths after cyclone Nilam hit the Cauvery, which had been effectively abandoned by Pratibha Shipping at Chennai outer anchorage without fuel. It became known later that the ship and its crew had spent weeks in Chennai’s outer anchorage without fuel, and had been without power for at least two days before the storm hit. 

The arrests of the Pawar brothers are widely seen as a reaction to the fact that the parents of Niranjan- one of the sailors who died on the Cauvery- committed suicide in Chennai two weeks ago. Their suicide note blamed the government, the company and the police for not taking any action even months after the incident.

Industry watchers say that little has actually be done to hold those accountable for the Cauvery tragedy in which six seafarers lost their lives. The Times of India quotes the representative of an organisation that handles the plight of sailor families: "DG Shipping and State police inquiries have been lenient with the ship owner since the beginning. Despite evidence that the owner abandoned the vessel and its 37 crew members, he was never summoned for an inquiry. At one point, they simply arrested two shipping agents," he said.  The Cauvery’s crew had spent weeks without provisions and pay before the incident.

"At least the suicide(s) has brought someone from the company before court”, another observer pointed out. “Neither DG Shipping nor the state police can take credit for that." 

Experts have pointed out that the official report of the incident has not yet been made public even after it was reportedly submitted in December, and that both the arrested directors are related to powerful Indian politician Sharad Pawar. Many other ships of Pratibha Shipping are stranded in India and abroad, with their crews in dire straits.

The Pawar brothers have been brought to Chennai on transit warrants, remanded in judicial custody and sent to Puzhal prison for fifteen days, it is believed. Police allege that Pratibha Shipping Company and its agents, the Chennai-based Sea World Shipping and Logistics, had "knowingly failed to rectify the repairs" in the life boat which capsized when the crew tried to abandon the ship. Two officials of the agency had been arrested earlier but were later released on bail. 

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