How is your transportation affected by the Panama Canal restrictions that have been in place for a few months?
Restrictions in the Panama Canal, which are forecast to last for another year, are affecting not only the timeliness of deliveries, but also shipping rates.
The Panama Canal, through which about 6 percent of the world’s shipping passes, is currently facing the worst water congestion in its history. At the end of August, some two hundred ships were waiting to pass through there – more than double the usual number at this time of year. The situation is due to restrictions that the canal’s management was forced to implement as a result of the drought of the century. The result is long delays in transportation, which is having an impact on price increases. Experts warn that the result could also be higher inflation.
The shortage of water in the reservoirs from which the Panama Canal draws has been a persistent problem for years, but this year’s level is the lowest in several decades.
How is the canal’s manager dealing with the situation? The daily limit of vessels that can use the canal has been lowered – from 36 to 32 vessels. Once again this year, the limit on the maximum draft of passing vessels has also been lowered. For the container transport market, this means that container ships passing through the canal have to be less loaded than usual – and therefore have to carry less cargo.
And how are shippers dealing with the situation? Some large ships unload hundreds of containers onto the railroad, which carries them across the Isthmus of Panama to then load them back onto a ship on the other side of the canal. Others bypass the Panama Canal by opting for a route through the Suez Canal or a route around the Cape of Good Hope. There is also an additional but extremely expensive option. The standard Panama Canal transit fee is about $400,000, but the canal’s management offers one or two “priority” crossings each day to the highest bidder. The record holder paid $2.4 million to bypass the queue.
Current regulations are expected to remain in place for at least another 10 months, unless there is heavy rainfall in the next three months.