The drought-afflicted Panama Canal Authority has announced a temporary restriction on the number of new reserved passage slots to alleviate the bottleneck of ships awaiting transit without reservation.
Global companies who would typically traverse the Panama Canal, one of the world’s busiest trade passages, have been forced to seek alternative routes due to a logjam of commercial vessels stuck at the canal’s gateway.
On 10 August, there were 161 ships in close proximity to the canal, which is higher than the usual 90 ships observed during the rainy season, according to Reuters, which also reported that around 40 additional ships were making their way towards the canal.
The Panama Canal Authority has implemented several proactive measures throughout the past year to ensure its competitiveness and operational capacity amidst the current challenges brought on by the drought.
Chief among these challenges is the critical issue of freshwater availability for both the population’s consumption and the transit of vessels.
The Panama Canal Authority thus announced its latest precautionary measure on 8 August that a new Booking Condition, namely Condition 3, came into effect for the utilisation of the Panamax locks.
The standard offering of reservations comprises 23 booking slots for these locks. Under Condition 2, in scenarios involving a substantial reduction in capacity (such as lane closures for maintenance), the allocation is reduced to 16 booking slots.
Meanwhile, under Condition 3, as currently being implemented, the booking slots are limited to 14 in total (comprising 10 slots for super-sized vessels and 4 slots for regular-sized vessels). To this day, reservations for the Neopanamax locks remain unaffected.
This adjustment, effective until 21 August has been introduced to alleviate congestion for ships already in queue to transit or in route, who were unable to secure reservations beforehand.
The authority aims to maintain a draft of 44 feet or 13.41 metres throughout the remainder of the current year and part of 2024, unless significant changes occur in weather conditions from current projections.
Consistent with this draft, during this period, 32 vessels per day will be transiting the canal, down from an average of 36 in normal circumstances, while Neopanamax transit capacity will remain largely unchanged at an average of 10 daily transits.
Since the previous drought in 2019-2020, the canal has been implementing procedures to improve water efficiency in its operations while conducting studies to identify long-term solutions to climate variability. This effort was further exacerbated by the El Nino weather phenomenon that applied further pressure on the canal’s water supplies.
However, the canal postponed further restrictions in June that would have required ships to lighten their loads to pass more easily. This decision came due to rainfall that alleviated the pressure on the canal at the time and provided relief for traversing ships.
Last week, the head of the waterway, Ricaurte Vasquez, informed Reuters that the economic repercussions of the restrictions will be most strongly felt in the fiscal year starting in October.
“The canal has experienced an extended dry season with high levels of evaporation, with a high probability of an El Nino condition before the end of this calendar year,” stated the Panama Canal Authority last month.
Consequently, the backlog of waiting vessels has increased, leading logistics and supply chain experts to predict further disruptions.