Surviving Panama’s Challenging Climate
Freight carriers have had to regroup their Asian shipments, redirecting from the US east coast to the west due to the significant impact of Panama Canal’s prolonged reduced working capacity. The Panama Canal Authority finds itself in the grip of what it labels as an outlandish drought, prompting a significant decrease in its operational feasibility. The harsh climate changes have forced a reduction in the maximum allowance for neopanamax ships’ draught to 13.41 meters. Additionally, daily canal transits have been sliced down by one-fifth to 32 daily, a measure likely to continue into the coming year due to the projected drier weather courtesy of the El Niño phenomenon.
Responding to Nature’s Challenge
The Panama Canal authorities, recognizing the influence of climate change on this vital waterway, are exploring alternative ways to facilitate shipments across the country. They’ve expressed interest in not only addressing current challenges, but also in embarking on proactive environmental programs to protect the water basin, conserve forest cover, and potentially establish a logistics corridor for diversified cargo handling within the nation.
Necessity of Adapting
According to Ricaurte Vasquez, the Canal’s administrator, in a recent press briefing, the need to find solutions to remain a viable trading route couldn’t be clearer. “If we don’t adapt, we will die,” Vasquez warned.
Cruise Industry Scrambles Amid Flow Changes
This crisis has melted into the cruise industry as well, with Royal Caribbean’s Rhapsody of the Seas abruptly scrapping all its 2023 – 2024 winter Panama Canal crossings. Apart from forcing vacation-goers to scramble for alternative travel arrangements, this move has fostered speculation that canal congestion has been a major factor in the surprise pull-out.
Dealing with Inactivity
As time rolls on, the waiting period before transit for commercial vessels has extended starting from 15 days at the month’s beginning, now reaching beyond 20 days due to a growing backlog of vessels awaiting passage. These delays have forced shipping companies to add canal transit surcharges of up to $500 per TEU (Twenty-foot Equivalent Unit) and have sparked special auctions for cancelled slots.
An Ounce of Prevention
Notably, container advisory CTI Consultancy’s Y Lane from Singapore posits that backhaul container services can travel 2,000 nautical miles extra via the Suez Canal or 5,000 nautical miles more around Africa. As he advises, there’s value in planning these changes sooner rather than later, considering the lengthy duration of the forecasted backlog. “The backlog is going to take months to clear, so it would be good for the container carriers to start planning now,” Lane declares.
In light of these critical challenges, shippers must examine their options and be strategic in their reactions to avoid getting swept under the current.
