- New “Fresh water” charge introduced to help the Panama Canal, the world’s busiest shipping routes cope with climate change.
- This will cost the shipping industry up to $370 million a year.
- From Feb. 15 a charge of $10,000 is introduced for any vessel more than 125 feet long.
- A variable surcharge based on the level of Gatun Lake to ensure the canal has enough water.
- At current water levels the ‘freshwater charge’ could cost global shipping $230 million and in a worst case as high as $370 million per year.
Shipping industry is already facing increased price pressures globally due to the coronavirus outbreak. Here comes another blow from the new “Fresh water” charge introduced to help the Panama Canal cope with climate change, writes Jonathan Saul for an article published in Reuters.
Fresh water charge
To help the Panama Canal cope with climate change, a new “Fresh Water” charge is introduced.
This will cost the shipping industry up to $370 million a year, marking another blow for maritime companies already hit by fallout from the coronavirus outbreak.
The busiest shipping routes
The Panama Canal said last month it would introduce a charge from Feb. 15 of $10,000 for any vessel more than 125 feet long.
Panama Canal is one of the world’s busiest shipping routes which handled nearly 14,000 transits last year.
Why is the new charge introduced?
The canal relies on water from nearby Gatun Lake. It has been hit by drought which affects water levels in the chokepoint.
The Panama Canal authority said it would bring in a variable surcharge based on the level of Gatun Lake to ensure the canal has enough water.
A short-term measure
The authority said the charges were a consequence of a lack of rainfall and this was a short-term measure needed to tackle the impact of climate change.
An additional charge?
The International Chamber of Shipping (ICS), which represents more than 80% of the global merchant fleet, said it was surprised by the charge after working with the canal authority on a separate increase in tolls which is due to come into effect in April.
Too many hits!
ICS secretary general Guy Platten said that the industry is already facing increased price pressures globally. He quoted,
- The coronavirus outbreak has upended supply chains and already disrupted shipping across the world leading to commercial losses for certain types of shipping, including container lines.
- The industry is also having to pay billions of dollars in extra fuel costs due to the tough new sulphur emissions rules that started in January.
Operating on slim margins
Platten said the global shipping sector was already operating “on the slimmest of margins.”
He added saying, “ICS calculates that at current water levels the ‘freshwater charge’ alone could cost global shipping $230 million. In a worst case scenario this could be as high as $370 million per year.”
Platten said, such cost hikes, without sufficient warning, places undue pressure on the industry at a sensitive time when asked to invest in a low emissions future.
Request to rethink
He urged the canal authority “to rethink the hasty introduction.”
The Panama Canal Authority said the measures were in line with water surcharges introduced at ports around the world. In a statement, it said the measure had been explained to customers.
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Source: Reuters
