At the start of 2014 there were 899 ships of 3,000+ TEU, with a beam of less than 32.3m ? the maximum able to currently transit the Panama Canal ? in the global containership fleet. They accounted for 3.76m TEU, 22% of global fleet capacity.
However, since 262 such vessels were ordered in 2006-08, further Panamax contracting has been negligible, as demand for the design has collapsed. In 2013, Panamax charter rates were severely depressed and demolition soared.

Rock Bottom Earnings
So why has the sector struggled so badly? Over the course of 2013, on average about 50 Panamaxes were laid up, the majority of which charter owned tonnage. This pool of idle capacity weighed heavily on the charter market - as the Graph of the Month shows - with benchmark time-charter rates averaging just $8,696/day in 2013, falling to $7,500/day by year end. At these levels owners in general struggle to cover costs. As weak rates persist, scrapping becomes an ever more appealing option.

Banished to the Beaches
66 Panamaxes of a combined 0.24m TEU were sold for demolition in 2013, accounting for 55% of total scrapped capacity (0.43m TEU). As a result, the Panamax fleet shrunk by 4.3% over the course of 2013. Scrapping candidates have also been getting younger - the average age of Panamax demolitions last year was 20.6 years, down from 23.0 in 2012. In addition, 21 Panamaxes were scrapped at 18 years or younger, compared to just three in 2012.


A Bleak Future
When the third set of locks opens (currently scheduled for 2015), containerships of 13,000 TEU will be able to transit the Panama Canal. At this point it is difficult to see where Panamaxes can be deployed competitively. Ships of 8,000+ TEU are expected to quickly replace them on the Asia-US East Coast routes, while some higher volume North-South routes (especially those involving Latin America) are already utilising significantly larger vessels.

On other North-South routes, operators are likely to prefer wide-beam vessels that are able to access a broader range of ports owing to their shallower draft, while smaller geared tonnage will continue to be in demand to service less developed ports.

Is then the intra-Asian arena the last refuge for cascaded Panamaxes? Indications are that port constraints, along with operational difficulties in balancing longer port turnarounds with the need for rapid service frequency, is limiting the demand for further Panamaxes on intra-Asian trades.

However, with global container trade growth projected to hit 6% this year, the growth of container capable supply is likely to struggle to keep pace (currently projected to increase by 4.8% in 2014). As such, in the short-term at least, some Panamaxes will be required to carry cargo, even if their route deployment is sub-optimal. And yet, in the longer term, Panamax boxships, once the workhorses of global container trade, clearly seem set for obsolescence.

(Source : Clarksons)