Inside Opinion: What Does the Future Hold for Panamax Vessels?

You cannot have failed to see the ongoing issues surrounding construction delays and now a series of strikes that have caused havoc in Panama for the new Canal. When it opens it will completely change the landscape, and I am not talking about the geography.

The whole outlook for a section of bulkers, boxships and product tankers will change forever. And if you are an owner of these vessels in the Panamax category, not for the better.

The KG funds have already said in some cases that the market for Panamax sized deep sea box ships is dead. Charter rates for their bulk counterparts are the worst performing of the bulkers and have been for some years, as owners wrestle with the commercial reality.

Put simply a Kamsarmax carries you more cargo in the sectors the Panamaxes used to dominate (beans, coking coal, bauxite, wheat and grains for example) but for the same or even better trip costs, as a generalisation. Ultramaxes and the latest Eco-Supras give you almost the same cargo uplift but for great savings on trip costs.

One wonders in a few years whether we will see a split in the deep sea bulk sector, geared "small" – Handies, Handymaxes, Supramaxes and Ultras, so 10-55,000 dwt, and ungeared "large" Kamsarmax, Baby Cape and Capesize, up to VLOC, so 80-450,000 dwt.

Economies of Scale

There are a lot of new and nearly new Panamax bulkers on the water and even a few still being built or on order. But now that the size restriction of the maximum size to fit through the old locks is shortly about to be lifted, shippers can charter the best size tonnage for the freight they have and are not limited by LoA and breadth.

The reason for being Panamax has gone, and so for wheat, bauxite and the other mid-bulks clearer economies of scale come into play. So the real winners here are the Kamsarmax owners, in my opinion.

Will Panamaxes disappear altogether? Of course not. But there can be no question that the market is moving toward eco-ships in the Supra, Ultra and Kamsar classes and that prospects for Panamaxes with the Canal changes are not rosy. Numbers of these once-ubiquitous ladies will fall dramatically.

What sort of market might there be for Panamax box ships and bulkers if their reason for being is literally dug out?

The Future

A great many young and not-so-young Panamaxes will go for scrap.

Some will find conversion to livestock carriers. Some, probably those blessed with gear, will retain time charter employment for the rest of their lives and not have to worry about a toxic spot market for these ladies.

Some will be converted to self-unloaders and enjoy a new lease on life for those willing to front up the money. Some will be lost.

I had an idea the other day about a very tiny extra group of these beleaguered bulkers.

What if a few may find conversion to offshore storage, perhaps as low-cost solutions to LNG bunkering infrastructure headaches, literally with standalone LNG tanks installed in the holds perhaps?

Panamax Bulker FLNGS coming to a harbor near you soon? Who knows?