Panama Canal Congestion Sees Shipper Pay Nearly $3 Million to Pass

Panama Canal faces climate-induced droughts, leading to ship congestion & high transit fees, impacting global trade ahead of the holiday season.

Panama Canal Congestion Sees Shipper Pay Nearly $3 Million to Pass
Source: Luis Acosta

The Panama Canal continues to grapple with congestion woes, heightened by climate-induced droughts. In a desperate measure to maneuver through the canal's elongated queues, shippers are paying a premium. A recent case saw a shipper shelling out a staggering $2.4 million to win a canal passage auction, in addition to the regular fees, cumulatively nearing $3 million for a single transit.

  • Water Woes: Prolonged droughts, a byproduct of climate change and the El Niño phenomenon, have taken a toll on the canal's operations. Reduced rainfalls have significantly lowered water levels, impeding regular vessel movements.
  • Operational Challenges: In response to reduced water levels, the Panama Canal Authority has downsized daily vessel passages from 40 to 32. Additionally, the ship's draft (submerged height) has been curtailed to 44 feet (13.4 meters). Waiting times for ships have experienced a drastic surge, soaring from the standard 3-5 days to a staggering 19 days at its peak.
  • Global Trade Implications: Given that 40% of US container traffic and 6% of global maritime trade traverse the Panama Canal, these disruptions could send ripples through international supply chains, especially as the holiday season looms.

Logistics experts are closely monitoring the situation, gauging the impacts on global trade, while the canal authority grapples with striking a balance between maritime operations and supplying freshwater to nearly half of Panama's 4.2 million residents. It's a race against time, nature, and operational logistics.

Sources: Business Insider | Yahoo News

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