The Panama Canal, overshadowed by Red Sea developments, faces ongoing challenges due to the country’s severe drought. The dry season, extending until May, has led to a decline in transits, with reservations further limited, according to recent data from the Panama Canal Authority (ACP). Although the pace of the decline has slowed, the impact on global supply chains remains significant, says an article published on freight waves website.
Summary
- The Panama Canal is facing challenges due to the country’s severe drought, leading to a decline in transits.
- In December, there were 746 ship transits, a decline of 4.7% compared to November.
- Transits through Neopanamax locks decreased by 5.9% in December, impacting Liquefied Petroleum Gas (LPG) shipping.
- Transits via Panamax locks saw a 4.3% decrease in December, primarily driven by a 31% sequential drop in dry bulk shipping transits.
- Average daily transits in December showed a significant year-on-year decline in both Neopanamax and Panamax locks.
- While the Panama Canal Authority increased transit slots to 24 in January, reservations remain 33% below pre-drought levels.
December Transits Decline, But At A Slower Rate
In December, there were 746 ship transits, encompassing both older Panamax locks and the newer Neopanamax locks introduced in 2016. The decline of 4.7% compared to November represents a slower rate than the substantial 21.9% drop observed from October to November. Despite this, December transits were 27.5% below those in December 2015 before the Neopanamax locks were operational.
Neopanamax Locks, LPG Shipping Takes A Hit
Transits through Neopanamax locks decreased by 5.9% in December, with a notable impact on Liquefied Petroleum Gas (LPG) shipping. LPG transits fell by 17.9% during the same period, following a 34.1% drop in November. Very Large Gas Carriers (VLGCs), crucial for LPG transport, initially shifted to the Suez Canal due to Panama’s drought but are now navigating around Africa’s Cape of Good Hope amidst Houthi attacks.
Panamax Locks, Dry Bulk Shipping Contributes To Drop
Transits via Panamax locks saw a 4.3% decrease in December, primarily driven by a 31% sequential drop in dry bulk shipping transits. This decline follows a significant 47% sequential collapse observed in November. U.S. agribulk exports, particularly soybeans to Asia, traditionally peak in the fourth quarter, leading to shifts in shipping routes.
Average Daily Transits Show Year-on-Year Plunge
Data on average daily transits reveal a significant year-on-year decline in both Neopanamax and Panamax locks. In December, Neopanamax locks averaged 6.71 transits per day, down 28% from December 2022. Panamax locks handled an average of 17.42 transits per day, marking a 37% year-on-year decrease.
January Reservations Increase, But Constraints Persist
While the ACP increased transit slots to 24 in January, up from 22 in December, reservations remain 33% below pre-drought levels. Panamax slots are down 35%, and Neopanamax reservations are down 30%. Although an improvement, the current schedule remains significantly constrained.
Challenges For Container Shipping Through The Canal
Container shipping at the Panama Canal faces challenges, with canal surcharges and reduced capacity. Some carriers, like THE Alliance, have pivoted to route via Panama on a ship-by-ship basis. However, most vessels, after the fronthaul leg through the canal, continue around the Cape of Good Hope on the return leg. This complicates transit times and introduces delays for importers.
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Source: freight waves
