Panama and Suez Canals offer cost reductions for COVID-19

shipping and freight news - shipping and freight resourceWhile the COVID-19 pandemic continues to affect and disrupt industries, jobs, lives, and economies around the world, there also seems to be a good fightback from the various industries, governments, and organisations in our industry.

Shipping lines have been offering time-sensitive cost-saving options for COVID-19 along with some relief in demurrage and detention charges etc.. Governments have been given tax breaks and business rescue packages to those most affected.

Now it seems to be the turn of the two main canals that serve the shipping and freight industry – the Panama Canal and the Suez Canal.

The Panama Canal based in the Isthmus of Panama connects the Atlantic Ocean with the Pacific Ocean without the ships having to go around Cape Horn in South America whereas the Suez Canal based in the Isthmus of Suez connects the Mediterranean Sea to the Red Sea without the ships having to go around the Cape of Good Hope in Southern Africa.

These canals save shipowners costs in terms of the transit, in terms of fuel costs, and also assists in reducing the carbon footprint of the transiting ships but of course, both these canals have toll charges for the transit of ships.


Seemingly in line with the cost-saving measures offered by other stakeholders in the maritime industry, the Panama Canal Authority has announced temporary relief measures for their customers.

These measures announced on the 29th of April 2020 offers flexibility to its customers faced with economic uncertainty by way of a temporary adjustment in the reservation system.

As per a Panama Canal statement, effective the 4th of May, 2020, the waterway will implement temporary changes to the requirements for the placement of booking guarantees and advance payment of reservation fees when the reservation is confirmed.

Customers will be allowed to place the guarantee for the payment of the booking slot prior to the vessel initiating transit.

Panama Canal Administrator Ricaurte Vásquez Morales said, “The Panama Canal has served customers for over a century’s worth of ebbs and flows, and so we know the importance of adaptability and partnership during this time. The months ahead will be challenging across our industry, but we aim to help reduce the financial burden for our customers today so we can all stand ready for a brighter future tomorrow.

These measures will be in place for 120 days ending on the 1st of September 2020. These measures are said to have been the outcome of a series of dialogues between the Canal’s leadership team and industry leaders, during which the Canal collected input on how to best provide support to its customers.

While the cost-saving measures were implemented now, the Panama Canal began implementing measures to safeguard its sustained operations, the health of its workforce, customers, and the crew of ships in transit in response to COVD-19 pandemic from 1st January 2020.

The waterway instituted heightened procedures in March 2020, including a reduction of on-site staff to only those essential for transit operations, and mandating their strict compliance with protocols set forth by the Panamanian health authorities.

The statement reiterated the Canal’s commitment to providing industry-leading environmental, time, and cost savings to shipping lines and shippers who want to take advantage of Panama’s all-water route and strategic geographic position.

The statement also confirmed that the waterway will continue to operate normally and with a full contingency of personnel needed to sustain transit operations for the time ahead.

panama canal suez canal - covid-19

 

Following suit, the Suez Canal authority has also announced that the fees for transiting the Suez will be reduced for some ships as a means of combating the current disruption to the shipping industry.

It has been reported that the Suez Canal Authority (SCA) has taken “into consideration the recent situation of the shipping market and global economy, and in line with the Suez Canal Authority’s flexible marketing policies which consider the mutual benefits of SCA and its customers, the SCA has decided to increase the incentives for container ships passing through the Suez Canal.

These reduced fees are expected to benefit container ships plying below routes :

  • Container ships plying between Northwest Europe, Tanger Med, and Algeciras to Port Klang, Malaysia, and the Far East – rebate of 17% on normal Suez Canal tolls ;
  • Container ships plying between Norfolk and ports to the North of it and Port Klang, Malaysia and ports to the East of Port Klang – rebate of 60% on normal Suez Canal tolls ;
  • Container ships plying between ports to the South of Norfolk and Port Klang, Malaysia and ports to the East of Port Klang – rebate of 75% on normal Suez Canal tolls ;
  • Container ships plying between ports to the South of Norfolk and Colombo and ports to the East of Colombo – rebate of 75% on normal Suez Canal tolls

These rebates will be applied on voyages starting at the above points from the 1st of May to the 30th of June 2020.

The Suez Canal Authority is already fighting an increasing amount of rerouting of shipping traffic via the Cape of Good Hope by shipowners trying to avoid the approximately $400-500,000 Suez Canal transit bills and also taking advantage of the very low bunker fuel costs currently.

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1 thought on “Panama and Suez Canals offer cost reductions for COVID-19”

  1. My brother knows so much about how the shipping industry works. I’ve learnt from him about how crucial the Panama and Suez Canals are to this industry. It only makes sense that the authorities have drawn up some measures to offer flexibility to its customers in this time of crisis!

    Reply

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