Global Shipping Disrupted Amidst Drought Conditions In Panama Canal

Credits: REUTERS/Aris Martinez/File Photo

Due to ongoing drought and low water levels, ship traffic has been restricted through the Panama Canal, leaving a traffic jam of vessels waiting to move through its locks system. 

Extended Dry Season

The Panama Canal Authority (ACP) said that as part of a worldwide phenomenon, in the last six months, the Canal experienced an “extended dry season” with high levels of evaporation. “The current drought severity, coupled with its recurrence, is historically unprecedented.” As of Aug. 29, the ACP said on its website that a total of 135 vessels are distributed between the Atlantic and Pacific entrances. “Of these, 53 have made reservations and will transit the Panama Canal without delay on their scheduled date. Vessels without reservations experience a wait of nine to 10 days, up from the usual five-day wait.”

Mike Steenhoek, executive director of the Soy Transportation Coalition, told DTN, “There remains a draft restriction of 44 feet (from the normal of 50 feet) for the larger ‘Neopanamax’ locks that opened in 2016. The ‘Panamax’ locks still have the normal 39.5 feet of allowable draft. The Panama Canal normally has 40 transits per day. That has been reduced to 32 transits — 10 for the Neopanamax locks and 22 for the Panamax locks. Dry bulk vessels, which soybeans and grain utilize, use Panamax locks. The restrictions on the number of transits are the culprit for the increasing queue we are witnessing at the canal.”

Queue Lining Up

Steenhoek said that as of Sept. 1, there were 124 vessels in the queue to transit the Panama Canal. Of those, 60 vessels have a booked slot and 64 do not, which will result in a wait. Most of the vessels in the queue are ‘Panamax’ vessels (i.e., those that utilized the original locks opened in 1914). The Panama Canal Authority has a goal to keep the queue to 90 vessels or fewer, but they are obviously exceeding that. “The Panama Canal Authority has announced the restrictions will continue for 10 months,” Steenhoek said. “As these delays continue, it will compel shipping companies to increasingly utilize the Suez Canal route and/or the route south of the Cape of Good Hope.”

AgriCensus noted that “The Authority kept only one to two daily slots for unbooked vessels that they auctioned to the highest bidder, according to a second-quarter earnings report from LPG company Avance Gas. This company said one bidder had paid $2.4 million for a one-way northbound transit at one auction on top of a regular toll fee of $400,000.” Steenhoek added, “Some of these exorbitant rates are due to a shipping company being contractually obligated to get to a location to load the vessel. If they don’t get there as scheduled, there could be a significant fine or other penalty, so on certain occasions a company may be willing to pay a significant rate at auction just to get the ship where it needs to go.” 

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Source: Dtnpf


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