Delays, Cancellations and Costs Mount as Panama Canal Reduces Transits

Table Of Content

• Panama Canal to Allow More Ship Traffic in January as Rains Ease Drought
• More than 100 container ships rerouted from Suez canal to avoid Houthi attacks
• Long delays at Panama Canal after drought hits global shipping route
• EXCITING: Royal Caribbean Brings Its Royal Beach Club Concept to Cozumel
• Ikea warns Red Sea attacks could disrupt supplies and deliveries

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.

Panama Canal to Allow More Ship Traffic in January as Rains Ease Drought

As part of the limit on the number of daily transits, the Panama Canal Authority set the maximum at 10 daily transits for the larger Neopanamax locks. The canal authority has been encouraging shipping companies to book their slots to minimize delays, but this is a costly process for the shipowners adding to the expense in addition to the transit fees. However, according to the ship agency Waterfront Maritime Services, it appears some ships are taking the advice. However, another 83 ships, up by three, are also expected to arrive at the canal without bookings. Panama Canal Administrator Ricaurte Vásquez Morales has detailed the challenges they are facing due to the drought and after repeatedly lowering the draft limits, he announced the Panama Canal would maintain a draft of 44 feet in the coming months.

More than 100 container ships rerouted from Suez canal to avoid Houthi attacks

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].

Long delays at Panama Canal after drought hits global shipping route

But a drought has left the canal without enough water, which is used to raise and lower ships, forcing officials to slash the number of vessels they allow through. That has created expensive headaches for shipping companies and raised difficult questions about water use in Panama. The passage of one ship is estimated to consume as much water as half a million Panamanians use in one day. There are also concerns about the impact of dry weather on the Rhine in Germany, one of Europe’s key shipping routes.

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

Water levels in the rainfall-fed lake have remained below normal despite the current "wet season". Container ships are the most common users of the Panama Canal and transport more than 40 per cent of consumer goods traded between north-east Asia and the US east coast. At the same time, last week S&P Global in its Commodities Insights report said it was hearing that coal shipments were being impacted. Some carriers they reported are splitting shipments across two vessels while others were exploring diverting to trips around Cape Horn. Ricaurte Vásquez Morales, the administrator of the canal, previously predicted the canal's income could fall by as much as $200 million next year because of the reduced traffic. For over a century, the Panama Canal has provided a convenient way for ships to move between the Pacific and Atlantic Oceans, helping to speed up international trade.

Panama Canal slashes the number of ships allowed through — drought means there isn't enough water in the channel

The cuts announced Wednesday by authorities in Panama are set to deal an even greater economic blow than previously expected. "We have to find other solutions to remain a relevant route for international trade. If we don't adapt, we are going to die," Vásquez told France24. Because of this, the canal authority has had to ration the transit through the Panama Canal locks, per the AP. Analysts are fearful that a repeat of 2022, when some larger vessels were forced to reduce their loads in order to continue using the river, could hit growth in Europe’s largest economy.

Panama opens new cruise ship terminal at mouth of canal - The Cheyenne Post

Panama opens new cruise ship terminal at mouth of canal.

Posted: Tue, 26 Mar 2024 07:00:00 GMT [source]

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.

Unlike the Suez Canal, which relies on seawater, the Panama Canal uses freshwater from an artificial lake to supply its waterway. But after an unusually dry year, the watershed of rivers and brooks that usually feed into the lake has been particularly meager, leaving Lake Gatun with about 80 feet of water. However, analysts at Project44, a supply chain platform, previously told Insider the upcoming holiday season could add further strain on the popular shipping route.

Norwegian Cruise Line offers diverse Panama Canal itineraries, but the current water level crisis poses operational uncertainties. The need to adhere to draft restrictions may compel Norwegian Cruise Line to adjust sailing schedules or consider alternative routes to ensure the safety and comfort of passengers. These changes could impact the cruise experience, including onboard entertainment, dining options, and shore excursion availability. Moreover, according to a report by The Peterson Institute for International Economics, projected water levels at Gatun Lake for 2024 are the lowest in the last five years, with March and April levels expected to be only 80 feet and 79 feet, respectively.

This historic low has forced the Panama Canal Authority to reduce daily traffic from 36 to 24 vessels and limit allowable draft sizes, impacting energy product carriers, container vessels, and other ships. Concern is growing across the shipping industry as well as the potentially broader impact following the recent decision by the Panama Canal Authority to reduce the daily number of transits to conserve water. PANAMA CITY (AP) — A severe drought that began last year has forced authorities to slash ship crossings by 36% in the Panama Canal, one of the world’s most important trade routes. The Panama Canal Authority has reduced daily traffic through the narrow corridor by nearly 40 percent compared with last year. Many ships have already diverted to longer ocean routes, which increases both costs and carbon emissions, while the global shipping company Maersk recently announced they will shift some of their cargo to rail. Holland America Line‘s Panama Canal cruises are renowned for their immersive experiences, but the low water levels present logistical challenges for the cruise line.

The US is a major exporter of grains — soybeans, corn, wheat — to Asia, much of it typically leaving the Gulf Coast and traveling through Panama. But low water levels on the Mississippi River have already prompted some American growers to put their grain on trains to the Pacific Northwest and ship it to Asia from there. Enrico Paglia, research manager at shipping services firm Banchero Costa, said overall US grain exports to Asia have fallen 26% this year compared to 2022, and grain flows through the canal have decreased 37% percent.

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.

But added transit time is an issue for fresh fruit, particularly from countries such as Chile and Peru that ship to the eastern US and Europe through the canal. Cherry season in Chile will start to peak in January, and grapes, plums, nectarines and blueberries all could have a hard time reaching market, said Ignacio Caballero, director of marketing for Frutas de Chile, a trade group representing Chilean fruit growers. Princess Cruises operates numerous voyages through the Panama Canal, and the current water level crisis could disrupt their scheduled itineraries.

“It’s getting more costly, and looking for alternative routes will increase costs and maybe also weigh on prices in the end,” she said. According to Avance Gas Holding Ltd., about 50 very large gas carriers are now on return voyages to the US via the Suez Canal or the Cape of Good Hope, up from 10 vessels in July. Many companies, particularly those moving fuels from the US Gulf Coast to Asia, have been willing to pay extra to ensure their ships get through.