Panama Canal: daily transit limited due to drought

The drought conditions affecting the area of Panama Canal for several months are increasing the challenges linked to its crossing, consequently impacting container shipping.

We introduced the issues of shipping through the Panama Canal in our previous article: https://www.dbgroup.net/en/news/navigating-panama-canal-current-logistics-challenges-and-db-groups-solutions

 

What's happening now at the Panama Canal?

Panama Canal Authority (ACP) will allow fewer ships to pass each day through the Canal.

 

What is the Panama Canal and how does it work?

The Panama Canal is a work of engineering linking the Atlantic and the Pacific Oceans. 6% of global maritime trade travels through it (source: The Economist).

Located 26m above sea level, it requires rainfall for the artificial locks to work properly. These locks lift ships, enabling them to sail in the lakes, and return them to the ocean level.

At its full capacity, the Canal allows the transit of 38/40 vessels daily.

Because of the drought, the Panama Canal Authority is taking steps to ensure the canal's service (Panama Canal Authority Advisory). Among other measures, they have decreased the number of ships allowed to go through the canal daily. This is the most relevant change for businesses and final customers.

 

What are the main actions that the ACP has taken to face the emergency?

ACP implemented measures to protect water reservoirs and ensure reliable transit through the Canal. The main are:

• Decreasing the draft of ships allowed to navigate the locks. Ships with draft less than 44 feet (13.4 m) can use Neopamax locks. Vessels can use Panamax locks no matter their draft length.
• Reducing the number of vessels daily allowed to transit through the canal
• Cross-filling at Panamax locks saves water by reusing it in different chambers. The amount is equal to saving water from 6 daily transits.
• Tandem lockages: two vessels can transit the chambers together when dimensions allow it.

 Despite all the actions taken, the water level of Gatun Lake keeps decreasing. To guarantee continuity of service during the upcoming dry season, ACP decided to further reduce the number of vessels allowed to transit to 18 units per day.

 Reduction of the number of vessels daily allowed to cross the Panama Canal

In the Customer Advisory issued on October 30th, ACP stated that they will apply the reduction progressively, based on the following schedule:

 

TIME RANGE	DAILY AVAILABLE SLOTS FOR RESERVATION
11.07.2023 - 11.30.2023	24
12.01.2023 - 12.31.2023	22
01.01.2024 - 01.31.2024	20
02.01.2024  onward	18

 

Which is the impact of such measures?

Dry Bulk Ships (dry cargo ships that transport commodities such as charcoal, iron, grain, etc..), and LNG vessels are the most affected by such measures. General cargo ships have more often drafts shorter than 44 feet, so they can use both the Panamax and the Neopanamax. However, longer waiting times are still expected. 

 

How does the transit of the Panama Canal work?

Carriers that need to sail through the Canal have a couple of options, which require the payment of a tariff:

• Advanced Reservation: once at the Canal, ships wait for their slot based on the booking schedule
• No Reservation: once at the Canal vessels register and wait for the first available slot

Due to increasing waiting times, vessels without reservations have to options to speed up the wait:

• a change of routing (sailing around South American countries)
• participating in expensive auctions that allow the highest bidder to skip the line (source: Fortune).

In both cases, this represents an additional cost for companies, and many of them have already announced the introduction of a Panama Canal Surcharge.

 

What can brands do to minimize the risks of shipping through the Panama Canal?

Waiting times are increasing, and we expect them to grow even more in the upcoming months. For this reason, we suggest all our customers to wisely consider the situation, paying special attention to the timing. This will help to optimize shipping costs and minimize the risk of incurring delays and unexpected expenses.

Our teams keep monitoring the situation. We will provide you more information. Meanwhile, we remain at your complete disposal to answer every question.

D.B. Group