Shipping companies are racing to pass through the Panama Canal after new restrictions imposed due to one of the worst droughts on record. The number of ships that can pass through the canal will be further reduced in the coming months. From the current 31 ships per day, the limit will drop to 25 during November and will reach just 18 starting from February 2024, i.e. approximately half of the boats transiting the canal under normal conditions. Some companies are willing to pay millions in order to get priority on waiting lists: the Japanese group Eneos paid almost 4 million dollars to overtake its competitors and win transit.
Increased transport costs
The situation in Panama worsened further. This will have heavy repercussions on maritime transport costs – says Paolo d’Amico, president and managing director of d’Amico International Shipping, a company specialized in the tanker market -. It will not have an impact on European trade, because that is because Europe-Asia trade passes through the Suez Canal, but on that between the United States and Asia and on all European companies like ours that also serve those routes. Given that the new constraints were announced in time, the companies have the opportunity to reorganize the routes, which is why d’Amico does not see a risk of new bottlenecks on the supply front while he is certain that on the price front the impact will be significant for the companies involved and also for American consumers, if the restrictions continue beyond February.
D’Amico International Shipping
The company reported net income of $48.9 million in the third quarter of 2023, up from $43.6 million in the same period last year, topping $148 million in the first nine months of 2023. I This year’s demand was supported by several factors, including the disruptions in oil trade flows due to the sanctions imposed by the EU and the United States against Russia. Europe, for example, had to source diesel from the United States, the Middle East and to a lesser extent China and India. The routes have therefore become longer, leading to an increase in costs, explains the CEO of d’Amico International Shipping. At the end of September 2023, the company’s net debt had fallen to $264.6 million, compared to $409.9 million at the beginning of the year. In the first nine months of 2023, operating activities generated cash of $224.37 million. Based on the quarterly results, the board of directors resolved to distribute an interim dividend for 2024 (relating to the 2023 financial year) equal to a gross amount of $20,025,983.50 corresponding to $0.141 per share. The coupon will be detached on Monday 27 November 2023 and paid from 29 November.
Oil prices are driving the market
The increase and volatility in the price of oil also contributed to supporting demand, which created interesting arbitrage opportunities, and very solid refining margins especially on petrol in the first half of the year and on diesel subsequently, in addition to the replacement of older refineries with more modern and efficient units, located further away from the main consuming regions, adds d’Amico. I also expect a strong market for 2024 – says the president and CEO of d’Amico International Shipping -. A variable to take into account, the conflict in the Middle East, is not weighing too much at the moment. Clearly, if there were an escalation and extension of the conflict to Iran, we would face possible oil shocks with heavy repercussions for our sector and for the entire European economy. But at the moment this scenario appears unlikely, although it is always difficult to make predictions.
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