Dry bulk shipping bares brunt of Panama Canal water level crisis

(Posted on 03/12/23)

The Dry Bulk and LNG segments have borne the brunt of restricted transits, particularly due to their ad hoc scheduling. In contrast, liner shipping has faced minimal consequences from transit reductions but has been significantly affected by draught reductions.

Container xChange, the leading online platform for container logistics, provided this crucial insight into the far-reaching effects of the ongoing Panama Canal crisis on global trade and on the shipping industry.

“The Dry Bulk and LNG segments have experienced the greatest impact due to restricted transits, primarily because they don't adhere to a fixed liner schedule but instead "arrive at the canal on an ad hoc basis." In contrast, liner shipping has faced minimal consequences from transit reductions but has primarily been affected by draught reductions. The maximum draught has been decreased from 50 feet to 44 feet, with each foot reduction in draught resulting in a "loss" of 400 TEU capacity. Consequently, an average container vessel can now transport 2400 TEU less.” shared Christian Roeloffs, cofounder and CEO of Container xChange.

The Panama Canal, currently spared from chaos, finds an unexpected ally in the form of a demand lull, preventing disruptions that would have posed a significant challenge for westbound trade shippers.

“At present, container shipping trade flows remain unencumbered. However, anticipating increased pressure on the US east coast, the Suez Canal and the Cape Horn in the coming months, shippers are likely to explore alternative routes to circumvent potential disruptions.” added Roeloffs.

The immediate impact includes a halved number of vessels passing through the canal, resulting in shipping companies rerouting vessels, blank sailings, longer transit times, and potential higher shipping costs in the coming times.

The mid to long term repurcussions of Panama Canal situation will run easily throughout the next year (2024) because of the irreversible environmental concerns that will dwindle the performance of the canal in time.

The ongoing challenges, compounded by the Panama Canal Authority's water conservation measures in response to a drought, have led to prolonged wait times, capacity limitations, and additional strain on shipping schedules. Measures like the restriction of booking slots and adjustments to vessel weight requirements have further elongated waiting times.

The resulting supply chain disruptions are expected to reverberate throughout the industry, potentially impacting container prices. Heightened competition for available slots has driven up spot freight rates, prompting carriers to re-evaluate pricing strategies to offset increased costs and uncertainties. Several carriers have already announced new fees for Panama transits including MSC who will impose a US$297/container Panama Canal Surcharges (PCS) from 15 December.

According to the Panama Canal Authority, the average daily queue of non-booked vessels waiting for transit has increased from 2.5 days on November 4, 2023, to 9.3 days as of November 28, 2023, for northbound vessels. Southbound vessels have experienced a similar trend, reaching an average waiting time of 10.5 days.

As a response to the crisis, carriers are redirecting more volume to the U.S. West Coast or opting for routes via the Suez Canal. This shift in shipping patterns may impact transportation costs, delivery times, and overall supply chain efficiency for U.S. businesses. The potential escalation of intermodal volume to the U.S. West Coast could affect capacity and efficiency, leading to increased costs or delays for businesses relying on these services.

Latest News

ClassNK releases ‘Prime Shipmanagement Guidelines’

ClassNK has released ‘Prime Shipmanagement Guidelines’ which aim to achieve sustainable... Read more

MCTC ensures quality remains at top of the table amid global tensions

In the face of unpredictable provisioning costs, port disruptions, and longer lead times MCTC has reinforced... Read more

NORDEN raises full-year guidance for 2025

On the back of the increased gains from sales of vessels and good operational performance, NORDEN, a... Read more

INTERCARGO welcomes ILO recognition of seafarers as key workers

The International Association of Dry Cargo Shipowners (INTERCARGO) has welcomed the recent decision... Read more

MMS advises why seafarers must remain vigilant about malaria

Despite its lack of publicity, malaria remains an ongoing epidemic and a perilous threat to seafarers... Read more

Veson: Bulker S&P activity falls sharply in Q1 2025

Due to market uncertainty, overall sale and purchase levels for Bulkers have fallen year on year, with... Read more

Britannia Group announces CEO succession plan

The Britannia Group, a leading P&I insurer, has announced that its Chief Executive, Andrew Cutler... Read more

INTERCARGO responds to IMO's decision on GHG reduction measures

At last week's landmark MEPC 83 meeting, the International Maritime Organization (IMO) Member States... Read more

NORDEN sells two additional vessels

In line with NORDEN’s strategy to realise asset values, the global provider of ocean-based freight... Read more

ILO delivers on Seafarers Key Worker Rights and fair treatment

The fifth meeting of the Special Tripartite Committee (STC) of the MLC concluded last week with some... Read more