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The Year Ahead

Outlook is brighter despite canal delay

How times change. It seems only yesterday that the shipping sector was facing meltdown in the wake of the global economic crisis.

The doom and gloom experienced then as new orders were cancelled or deferred, as freight rates fell through the floor, the prices of cruise vacations were slashed and as fast increasing new-build capacity met lower demand has mostly disappeared.


Things are clearly better now, but there are still some reminders of the dark days of 2008-2009 – perhaps best illustrated by slow (or what is in effect optimal) steaming and a boom-time capacity overhang that is only now beginning to come into line with demand. This was reflected in 2013 in the more than 200 per cent jump in the Baltic Dry Index, although tanker indices were more mixed; and a firming of container rates in the second half of last year in the key Far East-United States trades.

So why the cautious optimism? Well, notwithstanding turn-of-the-year construction wrangles with contractor consortium Grupo Unidos por el Canal (GUPC), this year is likely to be dominated by the impending inauguration of the enlarged Panama Canal. Unfortunately, this ceremony is now delayed at least until first quarter 2015, dashing the Panama Canal Authority’s cherished hopes of an October 2014 completion date that was meant to coincide with the centenary of the canal’s opening.


The slight delay to the US$ 5.25 billion mega-project has had its unintended advantages and given all those impacted by the canal enlargement more time to prepare and get the necessary facilities and equipment in place.

Ports along the US East Coast and around the Caribbean region are still jockeying for position ahead of the larger tonnage that is set to be deployed in east-west trade between the Far East and East Coast United States. Baltimore, Miami, Jacksonville and Charleston as well as Kingston, Manzanillo (MIT), Caucedo and Freeport are the main protagonists.

Readying facilities across the region to accommodate larger vessels is well advanced but requires significantly levels of financing. While the United States gateways have (in theory) access to federal dollars for terminal and dredging projects, the bureaucratic hurdles in their way offset any advantage they may have over nimbler but less well funded ports located on Caribbean islands or the Latin American mainland.

All these ports are, in effect, gambling that their major long-term investments will pay off as lines continue to call with larger ships of up to 12,000 teu. There are bound to be winners and losers here, but we are unlikely to know which port has won or lost until perhaps 2015.

Around the region, 2013 saw a mixed economic performance; and, clearly, this is set to continue into 2014. In general, Caribbean economies picked up pace in 2013 compared with their less-than-dazzling performance the previous year. In 2012 it was continental nations such as Belize, Suriname and Guyana that were the strongest in terms of growth – in each case largely as a result of factors unrelated to tourism.

Last year’s figures were still awaited as CM21 went to press, but the English-speaking Caribbean (notably Jamaica, Barbados and Trinidad but also Antigua, Dominica, Grenada, St Lucia and Montserrat) appear to have once again performed poorly.


Now to the vitally important cruise sector, at least for some island economies. Reports suggest that global demand for cruises is set to almost double by 2025. It is still unclear whether the Caribbean will see similar growth over the same period compared with other destinations as this is a mature market with some capacity constraints.

Nevertheless, with the world’s top three cruise home ports (Miami, Port Everglades and Port Canaveral) on its doorstep, the wider Caribbean area is likely to maintain its pre-eminence as a destination for some time to come. And, the Bahamas is still the world’s number one nation for cruise passenger arrivals.

So better times are here and overall prospects for the region look reasonable for 2014. I suppose it’s the best we can hope for ahead of an even bigger recovery in 2015.