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  • Writer's pictureTenace Offshores Limited

Growing Panama Canal congestion a rates ‘wild card’

Delays at the Panama Canal averaged about 15 to 19 days per vessel in the first week of August, with low water levels in the Gatun Lake restricting the numbers of fully-laden vessels able to make the transit. Effected by what it has described as an “unprecedented” drought, the Panama Canal Authority has shaved around 2 m off its maximum draft for its neopanamax locks as well as slashing the maximum amount of daily transits by 20% to just 32 voyages a day.

The changed operating conditions are seeing ships from all segments facing delays, with vessel tracking data showing enormous queues at both sides of the waterway.

“The Panama Canal delays are a reminder of the urgent need to address climate change. The shipping industry is one of the most vulnerable sectors to the impacts of climate change, and we need to take action to reduce our emissions and mitigate the risks,” commented Thomas Zaidman, managing director of Sagitta Marine, a dry bulk owner and operator.

While rains have returned to Panama, the authorities are unlikely to make any upwards revision on drafts or the number of transits anytime soon aware of the effects of this year’s El Niño weather phenomenon which tends to bring drier weather to the country later on this year.

Indeed, the canal authority has conceded it could take a hit of up to $200m in earnings for next year if conditions persist.

As a stark reminder of the changed conditions there was little fanfare to the welcome of the 17,312 teu Ever Max last week, which became the largest boxship to ever transit the waterway. The reason? The vessel (pictured above), having paid $1.5m in tolls, was forced to unload 1,400 teu at the port of Balboa to meet today’s 13,345 teu draught restrictions. The containers were taken by rail to Colon and reloaded there for onward shipment to Savannah.

“The Panama Canal is really the wild card in the container shipping market right now because of the potential impact it may have on freight rates and US imports from the Far East from one week to the next,” Peter Sand, chief analyst at freight rate platform Xeneta.

After the reduction of transits was set to 32 in late July, Sand said the “slack has gone”.

Noting the recent successful rise in general rate increases (GRIs) on the transpacific, Sand said: “Something is boiling right now, and shippers should consider their options and manage their risks as Panama congestion is on the rise, mostly backhaul/southbound, but also on the fronthaul.”

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