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Panama Canal Administrator Considers Further Transit Reductions

Panama Canal

The Panama Canal, responsible for facilitating approximately 5% of global trade, could take additional measures to curtail daily vessel transits if the current drought persists, according to the canal’s administrator.

Backlog Grows Amid Water Conservation Measures

In response to the ongoing drought, the Panama Canal initiated measures such as limiting vessel draft and daily passage authorizations earlier this year, leading to a significant backlog of ships waiting to traverse the trans-oceanic canal. This backlog has prompted many vessels to reduce their cargo loads. Thus, resulting in increased freight costs just ahead of the crucial Christmas shopping season.

Reduced Daily Transits and Vessel Draft Limits

Currently, only 32 vessels are authorized for daily transits, down from the standard 36 in normal conditions. Moreover, the maximum vessel draft has been reduced from 50 feet to 44 feet to conserve water resources.

Efforts to Alleviate Congestion

To mitigate the congestion, the canal recently revamped its reservation system, permitting more non-booked vessels to pass through. Also prioritizing ships with the longest wait times.

Improvements in Ship Queue and Wait Times

As of Tuesday, the number of vessels awaiting passage in Panama has decreased to 116. The number is down from over 160 in early August. The maximum wait time has also improved. It is now standing at 14 days, down from 21 days a month ago, according to official data.

Future Measures Under Consideration

Ricaurte Vasquez, the head of the Panama Canal Authority, indicated that, if necessary, the canal might opt for further reductions in daily transits before implementing any additional cuts to authorized vessel draft, as this has the most significant impact on shippers.

No Passage Restrictions for Now, but a Forecasted Potential Reduction

Currently, there are no plans to impose passage restrictions this month. However, in the budget for the upcoming fiscal year beginning in October, the canal foresees a possible reduction to 30-31 daily transits, according to Vasquez.

El Niño and Ongoing Drought

Explaining the situation, Vasquez mentioned, “The El Niño weather phenomenon has been very severe this year, with hot temperatures simultaneously affecting the Pacific and the Atlantic. We anticipate that, in the absence of significant rain, we’ll have to be prepared for further challenges.”

Concerns Over Prolonged Drought

Gatun Lake, which feeds the Panama Canal, has witnessed a decline in water levels. Last week, it stood at 24.2 meters (79.7 feet), down from the typical September levels of 26.6 meters in recent years. If the drought persists beyond a year, the canal might need to revise its weather modeling, potentially triggering more restrictions.

Future Plans for Water Conservation

To ensure a sustainable water supply for the canal, Panama is exploring modifications to the flow of water into Gatun Lake. The canal currently utilizes 50 million gallons (190 million liters) of fresh water for each ship passing through. Vasquez stated, “We are eagerly working with the authorities to establish additional reservoirs.” This proposed project, contingent on legislative changes and congressional approval, could be open for bids next year.

Warnings of Potential Trade Disruptions

Experts have cautioned about potential disruptions to maritime trade as next year is expected to be even drier. An early start to Panama’s dry season and above-average temperatures could lead to increased evaporation and near-record low water levels by April, further complicating global shipping.

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Disclaimer: This article serves solely for informational purposes and should not be construed as financial advice. Thus, we strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.


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