Panama Canal could affect local fruit exporters adversely

South African fruit

exporters will have to

keep a close watch on

developments around the

Panama Canal as it will

give competitor countries

an advantage in reaching

markets more quickly.

According to Andy

Connell of Abarc Services,

while South African

industry has, for the

most part, not been

too interested in the

developments around the

canal, faster transit times

for fruit coming from

countries such as Chile

will have an adverse effect

on local exporters – not

to mention the impact on

freight rates.

“I have no doubt that

our freight rates in South

Africa will come under

strain when the canal

opens in June this year,”

he told a gathering of the

Exporters Club Western

Cape (ECWC) last week.

“South African fruit

exporters have been facing

increasing competition

from South American

countries – Chile in

particular. With the

channel open it is going to

move very quickly through

the canal to market. It will

be a far more profitable

operation than our fruit

industry.”

He said South African

fruit for the northern

markets was moved on

smaller vessels that often

got stuck in queues and

were transshipped several

times before reaching

Europe.

“The canal will offer fruit

exporters from countries

like Chile a more profitable

operation as the economies

of scale on the bigger

vessels are greater and so

the rate they can offer will

be better. Our rates will

come under strain.”

He said the USA would

undoubtedly be the biggest

beneficiary of the canal,

with the country stating

on record that it would

be a game changer for the

transport and logistics

sector domestically.

“A lot of cargo f lows

from east to west in the

USA on rail. The vessel

capacity that the upgraded

Panama Canal will offer

will see more domestic

USA cargo moving to sea

freight. The volume density

and the freight rate will

make the sea route more

cost effective even it if does

add five days to the transit

time,” said

Connell.

He said

the canal,

which was

expected to

open in June

this year,

had divided

industry

across the

world into

two camps.

“There has

been much

debate about the impact of

the canal on shipping. On

the one hand there is the

camp that merely sees more

volume opportunities to

exploit on the traditional

routes through to the US

east coast from the Far

East, and on the other

hand there is the camp

that sees a whole new

world opening up with

some significant changes

under way to how shipping

works.”

But, said Connell, it

would take a long time

for any serious benefits to

percolate down to South

Africa.

“From a fruit exporting

perspective we are going

to have to look at our rates

and keep the

pressure off

as long as we

can,” he said.

At a cost

of over

$5 billion

dollars, the

new canal is

just about

complete

and is

already

seeing vessel

sailings

every week as the systems

are tested. It has been

extensively dredged, with

the dangerous curves

straightened out, allowing

for two panamax vessels

to easily pass each other.

Three new locks have also

been installed in a new

navigation channel.

INSERT & CAPTION

From a fruit

exporting perspective

we are going to have

to look at our rates.

– Andy Connell