Xeneta: Panama Canal expansion could push freight rates further down

Ocean procurement software provider Xeneta reported freight rates may further decline as carriers seek to fill larger ships that are now capable of transiting the expanded Panama Canal.    Freight rates could potentially deteriorate even further as carriers attempt to fill larger ships now capable of transiting through the Panama Canal after its recently completed expansion, according to ocean procurement software provider Xeneta.
   A third set of locks and other improvements have increased the size of ships able to transit the waterway from about 5,000 TEUs to up to 14,000 TEUs. The new traffic lane at the canal opened June 26.
   Although the waterway makes moving cargo to the U.S. East Coast and Caribbean ports faster and cheaper, “there could be real trouble brewing on the horizon,” Xeneta CEO Patrik Berglund said.
   “Firstly, the neo-panamax vessels have to attract trade to this fresh route, and this could initially force them to keep rates artificially low – the last thing the industry needs,” Berglund said. “Then we have the fact that more ships will be able to compete on the East Coast, potentially pushing rates even lower.
   “This will most probably be exacerbated by the newly arriving fleets of 18-20,000-TEU megaships – MSC has four in the pipeline now – causing a cascading of existing tonnage onto attractive routes, like the East Coast. It all spells, what could be, an impending financial disaster for a segment currently defined by consolidation, new alliance-building, and on-going uncertainty,” he added.
   However, many carriers announced rate increases on July 1 and last week the Shanghai Containerized Freight Index said the cost of moving freight from Shanghai to the U.S. East Coast rose to $1,785 per FEU compared to $1,496 a week earlier.