Panama Canal has gotten so dry and backed up after brutal drought that shippers are paying up to $4m to jump the queue

Table Of Content

• The ‘dark fleet’ of tankers shipping Russian oil in the shadows
• What has caused low water levels in the Panama Canal?
• The EU's Red Sea Naval Mission is Getting Smaller
• Former HGTV star slapped with $10 million fine and jail time for real estate fraud
• Ikea warns Red Sea attacks could disrupt supplies and deliveries

The authority holds auctions whenever a ship with a reservation cancels, and slots this year have gone for as much as $4 million. A year ago, the average auction price was around $173,000, according to data from Waypoint Port Services. “It’s just astronomically out of control,” said Francisco Torné, one of the firm’s country managers for Panama.

The ‘dark fleet’ of tankers shipping Russian oil in the shadows

The Panama Canal provides a short cut between the Atlantic and Pacific oceans for 6% of the world’s maritime commerce. The Panama Canal Authority (ACP), which allocates reservations, has slashed this number to 24. On December 1st it will go down to 22, and from February onwards only 18 ships will be able to cross each day. In late July, the state-owned ACP limited the number of vessels passing through the waterway each day to an average of 32, down from the usual 36. In previous droughts, weight restrictions were imposed because heavier boats risk running aground in the shallower water.

What has caused low water levels in the Panama Canal?

Gatun Lake, which forms a key stretch of the canal system and provides fresh water for its locks, saw little rain this year, as El Niño triggered a withering drought. So the Panama Canal Authority has ratcheted back the number of ships allowed to pass, from an average of 36 to 38 per day in the past to an expected 18 in February, half the normal amount. The authority also reduced draft levels — how low a vessel can sit in the water — meaning some ships must carry less cargo. Even if the rains return on time next year, traffic congestion and draft restrictions will linger long into 2024. In 2023, Gatun Lake experienced water levels below seasonal norms due to insufficient rainfall.

The EU's Red Sea Naval Mission is Getting Smaller

Panama Canal Water Source Gatun Lake Still Shrinking, Slowing Ship Traffic - DTN The Progressive Farmer

Panama Canal Water Source Gatun Lake Still Shrinking, Slowing Ship Traffic.

Posted: Mon, 06 Nov 2023 08:00:00 GMT [source]

Ships that usually crossed the canal in two-and-a-half days had to wait more than nine to make the journey, Insider previously reported. An expansion completed in 2016 added two new locks to accommodate significantly larger “neo-Panamax” ships, which are bigger, heavier and require deeper water to move through the corridor when fully laden. A previous Times investigation found that canal officials ignored warnings that they would need new sources of water in order for the expansion to succeed. “The fact that the Panama Canal operates on freshwater is a major disadvantage compared to other water routes,” said Ricaurte Vásquez Morales, the administrator of the Panama Canal Authority, in a video address last month.

Aurora Expeditions is not the only cruise line affected by the Panama Canal’s low water levels. Several other prominent cruise operators rely heavily on the canal for their itineraries, offering passengers unforgettable experiences traversing this iconic waterway. Canal authorities attributed the drought to the El Niño weather phenomenon and climate change, and warned it was urgent for Panama to seek new water sources for both the canal's operations and human consumption. The same lakes that fill the canal also provide water for more than 50 per cent of the country of more than four million people. With shipping companies already dealing with disruptions in the Red Sea due to attacks on ships, word comes that another important trade route is being forced to curtail traffic. The Panama Canal Authority understands the implications but reports it is balancing the issues to keep the canal functioning while also ensuring a drinking water supply for 50 percent of the country’s population served by the same reservoir.

Ikea warns Red Sea attacks could disrupt supplies and deliveries

Cruise ships pay a hefty surcharge for a reserved transit date and time,  and the Canal Authorities are very willing to rake in this extra. Panama Canal Authority recently opened two more passage slots per day for ships that don't have have priority to pass, as container ship do, and this week the backlog had decreased since to 115 ships. Ship owners have the options of carrying less cargo, adding thousands of kilometres to their trips or grappling with queues that earlier this month backed up 160 vessels and delayed some ships by as much as 21 days. As many as 24 vessels will be permitted to pass through the system daily, up from 22 currently, the canal authority said in a statement Friday. The Panama Canal Authority further reduced the number of boats that can transit through the strategic waterway, which has been hit by an intense drought. Weather-related problems have been building at the canal for some time, prompting the ACP to pledge to save water during the rainy months, although it said that the economic impact was unavoidable.

Some companies had planned to reroute to the Red Sea — a key route between Asia and Europe — to avoid delays at the Panama Canal, analysts say. Panama Canal administrator Ricaurte Vasquez now estimates that dipping water levels could cost them between $500 million US and $700 million US in 2024, compared to previous estimates of $200 million US. Low water levels in the Panama Canal prompted capacity cuts earlier this year and carriers are still facing months of navigating restrictions. There's a backlog of vessels waiting to cross one of the world's crucial maritime passageways which saves ships from travelling thousands of kilometres. The owner of the Dali, the massive cargo ship that lost power and knocked down the Key Bridge on March 26, killing six men, has declared “general average,” according to Darrell Wilson, a spokesperson for the ship’s owner, Grace Ocean Private Ltd[1].

The canal typically handles an estimated 5 percent of seaborne trade, including 46 percent of the container traffic between the East Coast of the United States and Northeast Asia. But last summer, the Panama Canal Authority began taking the drastic measure of reducing traffic. Hapag-Lloyd AG, Mediterranean Shipping Co. and Maersk all have announced new Panama-related surcharges in recent months.

Nikolay Pargov, chief revenue officer for container shipping platform Transporeon, said container ship operators are already booking alternative routes to avoid the canal for 2024. The rigid routes of container ships – which for some shipping companies have thousands of customers to consider for each vessel – make it more difficult to re-route them at the last minute. Snell of British American said the clogged canal forced his company to stop shipping fresh-cut ferns from Seattle to Rotterdam’s flower markets. The business found work-arounds for other products from the US West Coast, hauling nuts and dried fruit from California to Houston or Norfolk, Virginia by rail, then transferring them to container ships bound for Europe.

He told French international news outlet France 24 that the El Niño climate pattern could worsen the situation further. The situation has become so dire that some shipping firms have paid millions of dollars to buy an earlier place in line. But any meaningful next steps will first need to contend with a standing law that prohibits the Panama Canal Authority from constructing reservoirs in watersheds beyond the one that feeds its existing lakes.

Last week, the ACP announced it had temporarily changed its reservation rules to permit more ships without a booking to travel through the canal. Panama’s population has quadrupled since the 1950s, and more than half the country relies on the canal’s reservoirs — Gatún Lake and the smaller Alajuela — for clean drinking water. Having read the whole article, it seems the cost  rather that drought conditions has changes this particular itinerary on a Royal Caribbean ship. "Each time a ship goes through there, it uses up about 80 Olympic-sized swimming pools of water and that all comes out of the lake," maritime logistics expert from Deakin University Peter Van Duijn told ABC News.

The problems at the Panama Canal, an engineering marvel that opened in 1914 and handles an estimated 5 percent of seaborne trade, is the latest example of how crucial parts of global supply chains can suddenly seize up. In 2021, one of the largest container ships ever built got stuck for days in the Suez Canal, choking off trade. And the huge demand for goods like surgical masks, home appliances and garden equipment during the pandemic strained supply chains to their breaking point. Things are looking up for the drought-stricken Panama Canal as new water levels allow an increase in the daily number of ships allowed through the man-made interoceanic corridor.

The government agency has reduced maximum ship weights and daily ship crossings in a bid to conserve the canal's water. Only 31 ships will be allowed through the canal per day from November 1, down from circa 36 to 38 daily ship crossings during normal operations. The measures, which will remain in place until 21 August, limit the number of new reservations for vessels passing through the canal’s older locks, used by smaller ships, to make more room for those waiting without reservations. The restrictions led to a bottleneck of ships waiting for their turn to cross and sent companies scrambling to find alternative routes. Commercial ships are facing long queues and delays to travel through the Panama Canal as a lengthy drought in the Central American country has led to a cut in the number of vessels able to pass through one of the world’s most important trading routes.

As of June 1, the former category will be increased to 8, while the latter will remain at 24, for a total of 32 vessels. The number of ships that can travel through the vital route has fallen sharply this year because of a lack of water for the locks, raising costs and slowing deliveries. Peter Sand, the chief analyst at the freight market analytics firm Xeneta, said disruption at the canal could push short-term shipping rates higher and “prompt shippers to alter their supply chains”. Should the canal bottleneck worsen, it’s likely other major grain exporters such as Brazil, Ukraine and Russia may step in to fill the gap for US products in Asia, Paglia said. Already, Brazilian grains have been more actively traded because of the canal’s increased restrictions, he said.

Panama Canal drought hitting world trade — MercoPress - MercoPress

Panama Canal drought hitting world trade — MercoPress.

Posted: Wed, 13 Dec 2023 08:00:00 GMT [source]

Reduced draft depths may necessitate modifications to Holland America Line’s fleet deployment strategy, impacting the availability of certain ships for Panama Canal crossings. Moreover, changes in transit schedules could affect planned shore excursions and port visits along the itinerary. Some of the largest containerships are being forced to offload boxes for transshipment by rail across the isthmus.

The Panama Canal’s low water levels–a consequence of a drying climate and El Niño–have forced the canal authorities to restrict daily ship transits, disrupting global sea trade and cruise itineraries, including this iconic crossing. Since July 2023, daily transits have been limited due to water shortages in the artificial lakes of Gatun and Alhajuela, reaching 22 vessels in November. From March 25, a total of 27 vessels have been able to pass daily through the waterway, which serves more than 180 maritime routes connecting 170 countries and reaching some 1,920 ports worldwide. The canal, used mainly by customers from the United States, China, and Japan, has a system of locks to raise and lower ships. For every ship that passes through, 200 million gallons of fresh water are released into the ocean. Oil and gas vessels, container ships hauling all manner of cargo, and grain carriers dominate traffic through the canal.