Whilst the Panama Canal Authority (ACP) maintains that it is committed to completing the waterway’s expansion in 2015, it is clear that all is not well with the finances surrounding the project. The lock construction consortium Grupo Unidos del Canal (GUPC) had threatened last week to suspend work on construction of the third set of locks claiming $1.6bn in cost overruns which are the responsibility of ACP. This spat has actually been escalating since ACP rejected the contractors’ original concrete mix for the locks, which set back the target completion date from October 2014 to June 2015. The locks are estimated to be around 65% constructed, with the overall expansion about 72% complete.
Following a Spanish government attempt to mediate in the dispute, ACP was more conciliatory this week and proposed that it and GUPC jointly contribute $283 million to the project which would allow GUPC to continue construction on the locks while claims for cost overruns are resolved under the three-step process established under the original contract between the two sides. However, Mr. Salini Impregilo, Chief Executive of GUPC partner company Pietro Salini did not mince his words in reminding ACP that the consortium is “not a charity”. He also suggested that ACP “stop telling fairy tales”.
To the north, and perhaps to nobody’s surprise, Nicaragua has announced that the start of construction of a $40 billion rival canal has been postponed to 2015. The government last year approved a plan that would see Chinese based financing of the project. Work was originally intended to start this year and take less than six years to complete the 286km new coast to coast waterway.
Shanghai handled a record 33.6 million TEU in 2013, an increase of 3.4% over 2012. For its part, Singapore also set a new record at 32.6 million TEU, up 2.9% on 2012 and a record tonnage of 557.5 million tons of cargo overall. Despite the cancellation of a few supplier licenses, Singapore also maintained status as the world’s largest bunkering port with 42.5 million tons sold.
The US Federal Maritime Commission (FMC) this week hosted a so called “global summit” to discuss the proposed P3 Network comprising Maersk, MSC & CMA CGM. Regulators from the US, the European Commission and China were reported to have had “open and candid discussions” on their differing regulatory frameworks and the potential effects of carrier co-operation on international trade. It appears that no significant conclusions were reached. The proposed Alliance would initially entail the pooling of 252 ships representing 2.6m TEU of capacity to be deployed in the Asia-Europe, Transpacific and Transatlantic trade lanes. Meanwhile, the G6 Alliance agreement update was submitted to the FMC on December 2 and will become active on January 16, unless the FMC submits questions within the timeline.
The Baltic Exchange has announced changes to its Capesize Index that aim to reflect both the larger Capesize ships now in use and sustained, intensified growth in trade between South Africa, Brazil, China and the rest of Asia. The Baltic says its new set of specifications describe a ship that “would produce the most reliable benchmark over the coming years”. The Baltic Capesize 2014 will be:
The Baltic has also introduced three new routes; C14 from China-Brazil-China, C15 from Richards Bay to Qingdao in China and C16 rom north Asia to Europe. Trial reporting on the new routes and vessel description will begin in late January/early February, with a lifting of the trial anticipated by the end of March 2014.
The November 24 agreement between Iran and the five permanent members of the UN Security Council plus Germany on Iran’s nuclear program has clearly not dampened the U.S. appetite to go after Iranian sanctions busters. The concession granted to Iran eases sanctions on insurance and transportation services to those countries already granted Iranian import waivers but does not extend to oil sales to other countries. This week, Singapore-based Singa Tankers and Siqiriya Maritime Corp, based in the Philippines were in the U.S. State department’s line of fire “for providing material support to the National Iranian Tanker Corp.” which is alleged to include disguised bank transfers. Also this week, an alleged UK intelligence agent was arrested in Iran after allegedly passing on details of the country's covert tanker operations.
In return for curtailing its nuclear activities, Iran is benefiting from approximately $7 billion in sanctions relief over the next six months which includes lifting oil exports to around one million barrels/day. At the time of the agreement, Iran was estimated to have the equivalent of 18 VLCC’s of oil in offshore storage and this has already started to move but it will obviously take time to fully reactivate the NITC fleet, which represents 6% of global VLCC capacity and 2% of Suezmax capacity.
Following a campaign last several months including several formal representations and an International Chamber of Shipping letter to the Chinese Government, the application of Value Added Tax (VAT) to international maritime services has been cancelled. KPMG, the Hong Kong Shipowners’ Association and the Asian Shipowners’ Forum all worked effectively to resolve this issue.
A highly unusual storm, the remnants of Hurricane Xaver, created havoc across much of Northern Europe last week. London’s main flood defence system, the Thames Barrier, was closed on Thursday evening and again on Friday afternoon for the 126th time in its 31-year history due to a major water surge across the North Sea which even caused flooding in central Hamburg. The UK Environment Agency issued 138 flood warnings across Scotland and England’s east coast but that could not save many homes from land erosion and loss.