Panama Canal Update: Severe Drought Worsens and Less Ships Are Able to Pass Through
Following “the driest October on record”, The Panama Canal Authority has decided to further reduce the number of daily transits through the Panama Canal.
Starting Nov. 3, the available booking slots for vessels will be reduced to 25 per day, down from the current maximum of 31. Further reductions are expected to follow each month, tiering down until settling at just 18 available slots in February. This would reduce the overall daily capacity of pre-booked passages through the canal to less than half the pre-drought average of 38-40.
Previously, reduced pre-booking allowances had largely only affected bulk commodity carriers, who typically would not look to take up an assigned slot. Further, the shipping industry seemed to have adjusted well to the changing dynamics, with the average number of vessels waiting for passage looking similar to previous years.
These new reductions, however, will likely impact all cargo planned to go through the canal. “Booking slots are now crucial, and non-booked vessels may face indefinite delays,” reports Splash 247.com. This means that container ships that reserve their passage well in advance, which transport the finished FF&E used across the hospitality industry, will now compete with those bulk commodity vessels, which will be forced to book slots.
This situation in Panama is not likely to improve any time soon. While there are proposals to improve the amount of water flowing to the canal, these projects are months, if not years, out, and seasonal rains aren't expected to return until well into 2024.
Immediate alternatives for cargo originating in Asia and bound for East Coast US ports include sailing West through the Suez Canal and the Mediterranean, or having the goods delivered to a West Coast US port, then transporting overland via truck or train. These alternate options may be more expensive, and add more transit time, but are less likely to have unpredictable delays. The extra cost of choosing one of these alternate routes, or paying large fees to “jump the line” in the Panama Canal, may be passed on to clients and consumers alike.
This is an unprecedented limitation on the canal’s ability to operate. Combined with compressed calendars, due to seasonal closures in Asia, it has the potential to lengthen lead times for finished goods, increase transportation costs, and create project delays.
Audit Logistics will continue to monitor the situation and provide updates as the industry reacts to the latest news from Panama.