Panama Canal Toll Boost Is Planned, Effective June 13, 2011
May 09, 2011
The first significant Panama Canal toll increase in four years is planned, beginning June 13, 2011 fears among world-wide shippers that the canal's long legacy of cheap rates will end as it moves into Panamanian hands. The increase -- 16% over the next two years -- was quietly announced last week by the Panama Canal Commission, and has drawn sharp criticism from major shipping lines in the U.S. and elsewhere. The canal handles 4% of the world's seaborne international trade -- about 14,000 ships carrying 200 million tons of cargo. That's five times as many ships and twice as much freight as handled by Long Beach, Calif., the U.S.'s largest seaport. Asia trade with the U.S. is heavily affected by the Panama Canal, because imports and exports coming from or heading to the Midwest or East often flow through the canal. In particular, the increase is likely to hurt chemical, oil and commodity companies that ship cargo in large bulk, and have had 82 years of relatively moderate pricing policies. ``I don't like it, and I don't think its justified, but there is very little you can do,'' said Corey Ansley, chairman of Cho Yang Ltd.'s North American unit, a South Korean shipping concern, which uses the canal more than three times a week. In announcing the increase, the Panama Canal Commission, a U.S. government agency run by a joint U.S.-Panamanian board, said it was raising tolls to modernize facilities and boost its capacity to handle larger ships. The increase, it insisted, would increase canal revenue by only about $100 million a year. But shippers say they are worried the increase may be a sign of things to come. The Panama Canal, built by the U.S., currently is operated by the U.S. government; it will be taken over by the Panamanian government in 2014 in accordance with the 1979 Panama Canal treaty. The Panama Canal Commission has always charged tolls to reflect cost only, and there wasn't any increase in tolls for the first 60 years of the canal's history. This may be ``the first volley in a move to pricing to maximum advantage,'' says Michaele Rodgers of Mercer Management Consulting Inc., a Lexington, Mass., company that follows the shipping industry. When control shifts to the Panamanian government, he says, ``there will be a temptation to run it simply to make money'' by adjusting prices beyond covering costs. The Egyptian government, he says, operates the Suez Canal that way.
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