Monday, July 27, 2009

Auto Shipping Helps Canal Recovery Says Panama Canal CEO

By Andrea Jaramillo and Eric Sabo

July 23 (Bloomberg) -- The Panama Canal Authority has begun to see “signs of recovery” in shipping traffic, including from freighters transporting cars, said Alberto Aleman, the authority’s chief executive officer.

Aleman said he expects traffic in the fiscal year ending in September to total about 295 million tons, up from a previous range he had given of about 290 million to 295 million tons. Traffic in the 95-year-old canal totaled 310 million tons in 2008. Revenue this year will be “similar” to last year’s record $2 billion, Aleman said.

“Amid the crisis, amid the recession, this is good,” Aleman, who’s run the canal since 1996, said in a telephone interview from Panama City. Car shipments have “declined as was to be expected given the problems that we’ve seen in the automobile industry worldwide but we’ve seen signs of recovery in this segment.”

U.S. auto sales have run at an annual rate of fewer than 10 million vehicles for each month this year, after averaging 16.8 million from 2000 through 2007. Domestic sales through June slid 33 percent for Ford Motor Co. in Dearborn, Michigan and 40 percent at Detroit-based General Motors Co., which emerged from a U.S.-backed bankruptcy reorganization this year.

The Panama Canal, which connects the Pacific Ocean with the Caribbean Sea, is undergoing a $5.25 billion expansion project through 2014 to handle larger vessels. The authority has secured $2.3 billion in funding from loans from overseas banks and plans to fund the rest with cash it generates from shipping fees, said Aleman.

‘Very Flat’

Shipping traffic through the canal between October and June dropped 3 percent compared with the year-earlier period, according to Aleman. Total transits from April to June fell 6.4 percent compared with a year ago, the authority said in a statement today.

Aleman predicted traffic will “stabilize” in 2010 near this year’s levels.

“I see a very flat year, a year very similar to this year,” Aleman said. “Maybe a little bit higher, but we’re being conservative in our analysis.”

The authority in June temporarily cut reservation fees for larger vessels and eased penalties for ships that arrive late in a bid to lure more shipping companies amid the recession. Aleman said he’ll review the measures at the end of September, the original deadline, before deciding whether to extend them.

Reduced Traffic

A May increase in what the canal charges for tolls helped compensate for lower income this year from reduced traffic and the temporary drop in fees, according to Aleman. He predicts income from tolls, which accounts for about 70 percent of the authority’s total revenue, will rise 9 percent this fiscal year to about $1.44 billion.

The Panama Canal Authority will transfer some $740 million in revenue this year to the Panamanian government, up from $700 million last year, said Aleman.

The U.S. is the largest customer for the waterway, representing about 70 percent of traffic, almost a decade after it handed over the canal authority to Panama. China is the canal’s No. 2 user, the authority has said. The canal, which shortens the route for Asian goods destined for the U.S. East Coast, handles about 5 percent of the world’s seaborne freight.

To contact the reporters on this story: Andrea Jaramillo in Bogota at; Eric Sabo in Panama City at

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