Severe drought in Panama hits global shipping industry

9:18 19.08.2023 •

An extreme drought in Panama is resulting in unusually lengthy delays and difficult restrictions alongside one of many world’s most vital commerce routes, illustrating the problem local weather change poses to world commerce, FT informs.

Excessive temperatures and one of many driest years on file have led authorities within the Central American nation, which is normally one of many world’s wettest, to decrease the variety of crossings and bar ships with heavy masses from utilizing the Panama Canal.

The restrictions — uncommon throughout Panama’s moist season, which lasts from Could to December — have led huge carriers together with German group Hapag-Lloyd to announce surcharges for routes that depend on the gateway between the Atlantic and Pacific. Whereas decrease demand for items exports has lessened the impression, vessels with masses nonetheless gentle sufficient to make use of it are dealing with prolonged waits of greater than two weeks.

“The Panama Canal is actually the wild card within the container delivery market proper now,” stated Peter Sand, chief analyst at Xeneta. “Shippers ought to think about their choices and handle their dangers as Panama congestion is on the rise.”

Greater than 3 per cent of world commerce by quantity, together with liquid fuel from the US and gentle fruits from South America, passes via the practically 110-year-old canal, which additionally supplies important revenue for Central America’s richest nation per head of inhabitants.

As much as 29 per cent of container commerce crossing the Pacific travels via the canal, in response to information supplier MDS Transmodal.

The restrictions, which have been rising all year long, will now be in place into 2024 barring surprising climate modifications, the canal authority said. The restrict on the variety of transits got here in July, simply as carriers have been set to extend commerce forward of Black Friday and Christmas within the US.

The canal’s locks depend on reservoirs. However the first half of the yr was the second driest in virtually a century within the canal’s watershed, in response to the Smithsonian Tropical Analysis Institute. The drought led Panama to declare an environmental state of emergency in Could.

The dearth of water pushed the Panama Canal Authority, or ACP, to toughen restrictions and in Could it imposed a depth restrict of 44 ft on the biggest ships, capping the quantity of cargo they will carry. From the tip of July it additionally restricted day by day crossings to 32, down from a median of 36.

That had contributed to a backlog of 264 ships ready to cross the canal on Friday, a 16 per cent improve in contrast with the identical day final yr, in response to cargo tracker MarineTraffic.

Common ready occasions for bigger tankers carrying liquefied pure fuel north via the canal elevated from eight days as of July 10 to 18 days as of Thursday, in response to delivery company Norton Lilly.

The typical value of sending a 40ft container from China to the US Gulf Coast through the canal at brief discover has risen 36 per cent to $2,400 because the finish of June, in response to information supplier Xeneta.

The prospect of additional delays may additionally have an effect on time-sensitive meals deliveries from the South American west coast to Europe. Foods and drinks made up 77 per cent of container shipments between these areas final yr, in response to MDS Transmodal.

This isn’t the primary time the Panama Canal has imposed depth restrictions. However the truth that the restrictions have been in place through the wet season was extremely uncommon, Steve Paton, director of the bodily monitoring programme on the Smithsonian Establishment in Panama Metropolis, stated, including that the following dry season was “trying very, very problematic”.


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