Nicaragua's Panama Canal Alternative Could Bring Big Bunker Savings

Tuesday July 22, 2014

A new analysis by SeaIntel finds carriers could greatly reduce fuel consumption by using the planned Nicaragua Canal, ShippingWatch reports.

If the $40 billion canal moves forward, it would offer an alternative to the Suez and Panama Canals.

Carriers traveling from Asia to the US East Coast (USEC) could reduce their bunker consumption by 17 to 30 percent by switching to the new canal from Panama, depending on the ship's size.

"Our analysis clearly shows that it would be beneficial for the carriers from a cost perspective to use the coming Nicaragua Canal on the Asia-USEC services instead of using the Panama Canal, due to the shorter sailing distance and the possibility for the deployment of larger vessels," the firm said.

SeaIntel analysed two routes between Asia and the US East Coast and found switching to Nicaragua would reduce the length of the trip from 6 percent compared with Panama and 5.5 percent compared with Suez.

"As the carriers will be able to reduce the sailing distance by 6 percent by switching to the Nicaragua Canal there is a clear incentive to make the switch in itself, but the Nicaragua Canal also allows the carriers to deploy larger vessels through the Nicaragua Canal on the Asia-UESC services," the firm said.

Switching to larger vessels compared with the size possible in the Panama Canal would allow for more fuel-efficient transportation of each unit of cargo, although that difference is less significant for Suez, which can already handle megaships.

The proposed canal in Nicaragua is still in preliminary stages, but a committee in the country recently approved a proposed route, and Hong Kong-based developer HK Nicaragua Canal Development Investment Co. Ltd. (HKND Group) is moving forward with environmental and social impact studies.