Panama City, August 30, 2023 – The Panama Canal Authority has officially announced the extension of transit restrictions for vessels navigating the iconic waterway, citing continued low water levels in the Gatun Lake due to an extended period of drought. These measures, which include limitations on daily transits and maximum draft, are projected to remain in force for an additional ten months as the region braces for the impact of the El Niño weather phenomenon, which is expected to exacerbate dry conditions.
The restriction on the number of daily vessel transits, reduced from 36 to 32, has shown minimal impact on container services utilizing the canal, with shipping operations proceeding relatively unscathed. However, the enforced draft restrictions have proven more significant, impeding carriers from fully harnessing their vessels’ capacities. While these limitations have sparked concerns about potential delays in inventory restocking for the forthcoming Christmas shopping season in the United States, experts assert that the constraints are unlikely to severely disrupt the Asia-US East Coast trade route.
Presently, a staggering queue of 124 merchant vessels awaits transit at either end of the canal, reflecting the logistical challenges posed by the ongoing restrictions. The daily passage slots have been redistributed, with 10 allocated to the larger locks and 22 to the older locks, leaving a mere eight slots available each day for vessels arriving without prior reservation.
Major liner operators, such as Maersk and Hapag-Lloyd, have managed the situation by strategically reserving their transit slots ahead of time, affording them priority passage over the multitude of bulkers and tankers languishing in anchorages on both sides of the waterway. Nevertheless, the draft limitations of 44 feet (13.41 meters), down from the standard 50 feet, have compelled significant vessels, including the EVER MAX with a capacity of 15,432 twenty-foot equivalent units (TEUs), to offload 700 TEUs before transiting with 13,345 TEUs aboard to meet the reduced draft criteria.
Experts estimate that this draft shortfall forces vessels to forgo using 1,500 to 2,000 TEUs of their full capacity, though carriers have indicated that while the impact is not negligible, it has not yet translated into substantial operational disruptions. Despite these restrictions, carriers affirm that the current schedules remain on track, with no discernible delays attributed to Panama transits.
The long-term ramifications of these restrictions on ocean freight rates remain uncertain, as they continue to evolve. The Shanghai Containerized Freight Index has reported a steady escalation in spot freight rates from Shanghai to the US East Coast, rising from USD 2,370 per FEU at the end of June to USD 3,100 per FEU in mid-August. Similarly, rates from Shanghai to the US West Coast have seen a more modest increase over the same period. However, an unexpected drop occurred last week, as spot freight rates from Shanghai to New York fell to USD 3,050 per FEU.
As the Panama Canal navigates through these challenges, stakeholders in global trade eagerly await further developments, with a watchful eye on the evolving impact of weather patterns and maritime economics.