This Panama Canal update addresses the severe drought-related challenges impacting global shipping. The reduced water levels have forced the Panama Canal Authority to limit vessel bookings, resulting in significant delays and disruptions.
In response, shipping companies are exploring alternative routes and implementing Panama Canal surcharges:
Overview:
- The Panama Canal is currently facing significant challenges due to a severe drought, resulting in a decrease in water supply within its reservoir system. As a result, the canal authorities have been compelled to reduce booking slots since May, leading to delays, backlogs, and disruptions in shipping activities. The Panama Canal Authority (ACP) has recently announced further restrictions, allowing only 25 booking slots per day, with plans to reduce this further to 18 by February 2024.
Exploring Alternative Routes:
- To overcome these ongoing restrictions, many shipping companies have started seeking alternative routes to bypass the Panama Canal with some opting for the eastern coast of South America. Additionally, carriers have recently implemented surcharges for containers transiting the canal due to increasing operational costs.
Impacted Carriers and Vessels:
- Notably, The Alliance carriers, including Yang Ming and Hapag-Lloyd, have announced alternative routes for specific services. Other vessels, such as the Liberian-flagged Green Sky, have chosen to navigate through the Strait of Magellan as an alternative to the Panama Canal. The number of bulk vessels transiting the canal has significantly declined, highlighting the substantial impact on the shipping industry.
Mitigation Efforts and Future Projections:
- The ACP is actively working to mitigate the situation, however the severity of the drought remains a challenge. Rainfall levels have remained 41% below expectations of late, leading experts to forecast 2023 as the second driest year on record. It is important to anticipate that these restrictions and challenges may persist for at least the next 10 months.
As we navigate these challenging times, the situation at the Panama Canal highlights the complexities in the global shipping industry of late. The drought-induced challenges and Panama Canal surcharges, compounded by high inflation and global geopolitical issues, emphasize the importance of strategic planning and flexibility in our industry to ensure continued efficiency in shipping operations under increasingly difficult circumstances.
Tom Jensen - Head of International Freight & Logistics FTA | APSA
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