Cargo Business Newswire (8-6-2014) “Panama Canal expansion could spike insurance costs”.

“The Panama Canal expansion could result in more than $ 1.25 billion in additional insured goods passing through the canal in a single day, according to a new report from insurance company Allianz Global Corporate and Specialty. The Panama Canal expansion, expected to open in 2015, will let an additional 12 – 14 larger vessels traverse the canal per day, which amounts to about 4,750 extra ships per year.

“The firm’s new report, ‘Panama Canal 100: Shipping Safety and Future Risks,’ reports that the surge in the volume of cargo will increase the loss potential of any possible casualty, which could lead to the disruption to the supply chain. Their premise is based on the fact that larger vessels can pose serious salvage challenges in a congested shipping environment, potentially leading to back-ups. The wider canal will let 12,600-TEU vessels through the new locks. Right now only container vessels with a maximum capacity of 4,400-TEUs can get through.

“The increased size of vessels will play a vital role in increasing canal throughput capacity from 300 million Panama Canal Universal Measurement System tons to 600 million PCUMS tons. The increase in volume will have a big effect on the insured value of goods transported through the canal, especially on the New-Panamax ships, which are as long as four football fields, according to the report. In the event of an accident, the report says, there could be a dearth of qualified salvage experts available to handle the mega ships.

“‘Larger ships automatically pose greater risks,’ says Captain Rahui Khanna, AGCS global head of Marine Risk Consulting. ‘The sheer amount of cargo carried means a serious casualty has the potential to lead to a sizable loss and greater disruption. For example, a fully-loaded New-Panamax 12,600-TEU container ship is as long as four football fields with a beam of up to 160 feet and could have an insured cargo value alone of $ 250 million.’

“The report says the regional impact of an incident with bigger ships is also of concern. With larger ships on the move in the surrounding region, an incident could also affect traffic at major ports in the U.S. resulting in a potential increase in the disruption of the flow of goods and insurance losses. In addition, a number of U.S. terminals on the East and Gulf Coasts are exposed to hurricanes. AGCS also says port operating procedures will have to be reviewed with regard to wind and weather constraints given the tight operating margins that these ships will be facing. AGCS believes training is key to offsetting the risks, both in the canal region itself and in affected ports.

“‘The expansion of the Panama Canal will represent a new shipping environment for many mariners,’ Khanna said. ‘Due to the increase in the number of larger vessels passing through the important waterway the level of training provided to pilots will be extremely important. Attempting to maneuver one of these vessels through such a restricted space in itself creates a much bigger hazard.’” —

“Wind and weather constraints?” “Tight operating margins?” They’ve known of these issues all along. They also knew they could stick consumers with all remedial costs. It’s the name of the game. Here’s what we were calling to their attention in “Berth of the Blues” (Vol. IV, Art. 24) back in August of 2005.

Katherine Yung of The Dallas Morning News had some very interesting observations about megaships over the weekend. She described the size, the amenities and the operational capabilities of one of the newest to call at the Port of Long Beach, the MSC Texas, and her report requires thoughtful consideration by American consumers. “In the next few years, all these ports will be overrun by these ships,” said Capt. Axel Bartel, of the MSC Texas, as he watched containers being unloaded from his vessel. The MSC Texas is just 36 feet shorter than the 1132-foot-long QM2, the world’s largest cruise ship, and was designed to carry 8,238 TEUs. Bigger is better, so they say, and megaships are being built in order to generate greater profits for the shipowners. The more containers carried, the lower the cost to transport each one. These behemoths operate with the same size crew, 23 seamen, and at the same speed, 25 knots, as their less imposing brethren, but megaships like the MSC Texas also boast creature comforts for the crew, like gourmet chefs, fresh-water swimming pools and saunas, weight rooms, ping-pong tables, and even a pharmacy.

That would all be well if the shipowners were footing the bills. But they’re not. As Ms. Yung reports, there are some drawbacks that are not generally considered:
• Ships of this size consume 20 tons more fuel per day than the next-biggest carriers. [There are about 44,000 gallons of diesel fuel in 20 metric tons, and if, “In the next few years, all these ports will be overrun by these ships”, each wasting more than a million gallons of diesel each year, what kind of an effect will this reckless squandering have upon the cost of fuel at the pumps, do you suppose? Do the math and pity the poor truckers.]
• It takes 15 to 20 minutes to bring a ship of this size to a standstill, which adds almost half an hour to every maneuver.
• These giant ships can only be brought into port during daylight and when the wind falls below 10 knots.
• Only three U.S. ports can handle them — Long Beach, Oakland and Seattle.
• They can’t even fit into the Panama Canal.
• They take four to five days to unload, instead of two to three.
• They require the use of taller, bigger and more expensive cranes than those found in most ports.
• They require longer berths than those found in most ports.
• They force major railroads to make adjustments, such as running longer trains on nonstop routes across the West.
• And if “In the next few years, all these ports will be overrun by these ships”, enormous amounts of funding will be required for dredging, berth expansion, equipment upgrading, bridge and highway replacement projects, and so on and so forth.

Will the shipowners provide this funding? Of course not. U.S. taxpayers and consumers will. But if more containers per ship lower the cost to transport each container, and generate higher profits for the shipowner as a result, why can’t U.S. consumers share in this cost saving instead of facing steadily increasing costs? [Darn it all! We’re so gullible!]