At the start of the week AIS tracking site Vesselfinder showed 123 ships waiting to transit the Panama Canal, which is almost a third over the average since the Canal was expanded seven years ago, due to continuing vessel transit cuts at the drought-hit waterway.
Following the driest year and October on record, the Panama Canal Authority (ACP) has been imposing draft level restrictions across the canal and steadily cutting daily vessel transit numbers from a maximum of 40, to just 18 each day from next February.
The decision to severely restrict transit capacity is to conserve water, with each transit of the Panama Canal consuming a large amount of water and if it doesn’t rain enough, the canal must either limit transits or reduce the allowable distance between the waterline and the hull bottom – the draft.
Larger container ships sailing from Asia to the U.S. East and Gulf Coast ports need more than the current limit of 44 feet of draft when fully loaded – down from 50 feet at the beginning this year – and while the ACP has committed to 44 feet for the foreseeable future, for every foot of lost draft, the vessels lose equivalent capacity for 350 teus.
This year’s current loss of 6 feet of draft can be equated to 2,100 teus, which means that each vessel has to sail with fewer containers, or unload containers on the Pacific side of the Canal and rail them across the isthmus for reloading to a vessel on the Atlantic side.
While the announced transit restrictions avert (or at least delay) the need for further draft reductions that would reduce carrier capacity again, the transit reductions are likely to affect schedules, with the number of Neopanamax transit reservation slots cut in half, from 10 currently to five as from January.
Limits on container ship transits and vessel drafts, will remain in place at least through June, stimulating some carriers to question the long-term viability of the waterway and consider diverting through the Suez Canal.
The Panama Canal’s operating restrictions that were first implemented in June, initially had a limited impact on container shipping operations as carriers had yet to get aggressive in blanking capacity to match weak demand. But now lighter loadings mean empty holds where cargo could be, pinching the bottom line of carriers as their operating costs rise. The sector is still less impacted than its tanker and bulk counterparts.
Unlike the Panama Canal the Suez Canal has no locks or changing water levels which means it can handle the largest ships, subject to effective piloting, as evidenced by the Ever Given grounding in March 2021.
With the Panama Canal’s ongoing restrictions and the growth in trade to the U.S. East Coast from Southeast Asia and the Indian Subcontinent accelerating, we are likely to see more services diverted or restructured to route through the Suez Canal.
If you have concerns or questions about any of the issues raised in this article, we can review your situation and explain your options, including alternative carriers, ports and routes.
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