After the driest October since at least 1950, the Panama Canal Authority has said it has been forced to ration the number of ships passing through the waterway which connects the Pacific Ocean to the Gulf of Mexico and so to the Atlantic Ocean.
This will naturally have an impact on the cost of shipping goods across the world, even if ships go the other way and pass through the Suez Canal.
The Panama Canal greatly reduces the time and distance for ships to travel between the Atlantic and Pacific oceans.
Operating 24 hours a day, 365 days a year, in normal circumstances between 13,000 and 14,000 ships use it annually, according to the canal authority.
A naturally occurring El Nino climate pattern associated with warmer-than-usual water in the central and eastern tropical Pacific Ocean is contributing to Panama’s exceptional drought.
Water levels in Gatun Lake, the rainfall-fed reservoir that is the main source of water used in the canal’s lock system, have “continued to decline to unprecedented levels for this time of year,” according to the ACP.
Starting from 3 November, booking slots have been cut to 25 per day from an already reduced 31 per day, ACP reported.
That number will be further reduced over the next three months to 18 slots per day from the start of February 2024.
In recent months, the ACP has imposed various passage restrictions to conserve scarce water. Earlier this year, authorities cut the number of ships passing through the canal for the first time ever.
The measures already in place have caused long delays, with tens of ships having to wait to use the canal.
That number will be further reduced over the next three months to 18 slots per day from the start of February 2024.
In recent months, the ACP has imposed various passage restrictions to conserve scarce water. Earlier this year, authorities cut the number of ships passing through the canal for the first time ever.
The measures already in place have caused long delays, with tens of ships having to anchor offshore waiting patiently to pass through the canal.
The Panama Canal is popular for East Coast trade because it is faster than other options. The shipping time for ocean cargo from Shenzhen, China, to Miami, Florida, using the Suez Canal takes 41 days. Traveling through the Panama Canal takes only 35 days.
“With a reduced transit schedule and an average of 26 daily arrivals by commercial ships per day on the Pacific side of the canal, and an average of 8 daily arrivals by commercial ships per day on the Atlantic side of the canal, the likelihood of cargo waiting idle will increase,” said Captain Adil Ashiq, chief officer of MarineTraffic in North America.
According to MarineTraffic, wait times have increased on the Atlantic side from last week on average by 30% (0.4 days to 0.6 days) and on the Pacific side, wait times have increased to 2.2 days.
The delays are leading shippers sending cargo to U.S. East Coast and West Coast ports to make alternativee plans, says Alan Baer, CEO of OL USA.
“Coal is transported through the canal but the more important energy item is LNG (liquefied natural gas) which the U.S. exports around the world, especially to Asia,” said Davis.
“Many agricultural products are shipped both from, and to, the U.S. The canal is a major corridor for container ships, so products coming to the U.S., from China for example, are being delayed.”
Container ships have priority in crossing the canal due to their contracts. The most impacted vessel types are wet bulk and dry bulk vessels, Ashiq said.
The exact effect on the Caribbean island economies cannot be readily predicted, but aspects like increased global prices for LNG will not be helpful.
Sources: MercoPress, CNBC.
