Shipping companies need to plan voyages around the availability of vessel transit slots on the Panama Canal as an extreme drought has hit traffic flows and led to longer waiting times for ships traversing the key waterway, according to Inchcape Shipping Services

A prolonged lack of rainfall since the start of the year has resulted in very low water levels at Gatun Lake and this has imposed limitations on the number of vessels that can pass through locks on either side of the artificial lake, given that each vessel transit requires cycling of around 20 million gallons of water and the reservoir supplies freshwater for the local community.

Consequently, the Panama Canal Authority (ACP) has reduced the maximum number of daily transits to 32 vessels, compared with the usual tally of 36, and restricted the maximum draft for vessels using the neo-Panamax locks to 44 feet, versus 50 feet last year, to conserve water.

Vessel bottleneck

This has led to increased waiting times of up to 10 days, mostly for vessels without reserved transit slots – up from the usual five-day wait – with as many as 135 ships stuck in queues at both ends of the canal versus around 90 normally, resulting in shipping delays that have hit the global supply chain.

Despite the drought restrictions, demand remains high for the vital 82-kilometre trade link connecting the Atlantic and Pacific oceans that is the primary route for 57.5% of the total cargo transported in container ships from Asia to the eastern coast of the US.

“There is presently a lot of volatility with Panama Canal transits, which makes forecasting and voyage scheduling very difficult for ship operators. Inchcape is therefore constantly monitoring transit slot availability and informing our clients of current waiting times and any rule changes,” says Inchcape’s Marine Service Manager for Central America, Fernando Ayala.

“We are advising shipping companies to plan their voyages around transit slot availability and pre-book well in advance to minimise delays when using the canal. For those that fail to reserve slots, waiting times could increase to 14 days if the present situation continues.”

Reservation costs versus auctions

It is possible to reserve or pre-book from 365 up to 3 days ahead of arrival day, with slot availability becoming tighter the closer it gets to the ETA, this is the reason why customers ranked lower in the canal’s ranking system may seek to reserve a slot up to three months in advance, Ayala explains.

Typical average auctions pre-booking transit fees are around $50,000 for a Panamax and $85,000 for a neo-Panamax, though operators also need to factor possible cancellation charges into the voyage cost equation when reservations are made many days in advance. Fees can run much higher for some daily slots that are sold at auction, with one vessel transit recently going for a whopping $2.4m – albeit still shy of a reported record $2.6m.

With no end in sight to the dry weather, Ayala warns traffic restrictions on the canal could persist into next year as the ACP budgets for reduced daily transits of around 31 vessels going forward, which may have an impact on future tariffs.

Inchcape is hosting a webinar that will focus on the current situation with the Panama Canal, provide useful insights for users of the canal and look at possible future developments.