Shippers are now proactively reorganizing their Asian shipping operations, returning from the US East Coast to the West Coast, as all branches of the Panama Canal have been reduced to prolonged operational capacity.
Facing what has been described as an unprecedented drought, the Panama Canal Authority has reduced the maximum draft to several meters for neopanamax locks, through which transit vessels cannot pass the canal with only 13.41 m depth and daily transit times reduced by 20% to 32 days – measures should be introduced in the new year as El Niño weather events can cause drier weather.
Aware of the constraints that climate change is placing on this vital waterway, canal managers are exploring other ways to move goods across the country.
“The direction for the Canal’s future is not limited to meeting current challenges but also includes proactive environmental initiatives. Efforts are being made to protect the watershed, conserve forest cover and explore the possibility of developing a logistics corridor to diversify domestic cargo handling options,” the authors said channel manager said in a statement yesterday. “We need to find a solution to continue to be a suitable channel for international trade.” channel administrator Ricaurte Vasquez said at a recent press conference.
Wait times for merchant ships have increased this month, starting from 15 days on 1 August and have now exceeded 20 days with a growing backlog of vessels waiting at either end of the canal. Special auctions are applied to cancel positions, with a very high fee charged. Shipping lines responded by imposing a transit surcharge of up to $500 per TEU.
Data from Denmark’s eeSea shows that the average number of freight shipments over the past eight weeks was 58 per week. Last week it dropped to 55.
“It is clear that if the drought continues and we only deal with, say, 55 ships like last week, then the problems will pile up,” warned eeSea founder Simon Sundboell.
Peter Sand, principal analyst for freight platform Xeneta, said shippers now need to consider their options as congestion in Panama is increasing. He further added that playing too tight in the spot market may not be the best option right now, as sentiment is driving up shipping costs monthly.
Andy Lane of Singapore container consulting firm CTI Consultancy said that the return container services can go beyond 2,000 nautical miles through the Suez Canal or 5,000 nautical miles further around Europe. He suggested some early shuttle services could also be switched to Suez routes. He further stated that the backlog will take many months to clear, so it would be nice if the container carriers started planning now.