As a historic drought continues to tighten the vise on the number and size of freight ships passing through the Panama Canal, many vessels are seeing increased dwell time and lead time to deliver their loads, the freight visibility provider project44 said Tuesday.
Without enough fresh water to operate its locks at standard pace, the canal recently added another 10 months to “Condition 3” restrictions that have squeezed capacity from 36 vessels per day transiting the canal to 32, and limited their draft underwater from the usual allowance of 50 feet to 44 feet.
Those limits are causing notable backups. As of August 29, a total of 135 vessels were waiting for passage at both the Atlantic and Pacific entrances, significantly above the canal’s goal to keep queues below 90 vessels, the canal said.
However, despite those kinks, canal authorities say they have not seen a measurable reduction in the amount of cargo passing through the route. Just as it was in 2022, the canal remains the primary route for 57.5% of the total cargo transported in container ships from Asia to the eastern coast of the U.S., the canal says.
One reason that the delays haven’t yet diverted ocean freight to other routes is that the effects aren't uniform across all carriers, Chicago-based project44 said. The canal typically gives priority to container ships over bulk carriers, and serves ships with appointments before those without.
The difference can be stark. Of the 135 vessels waiting in line, 53 have made reservations and will transit the Panama Canal without delay on their scheduled date. But the wait time for vessels lacking a booking appointment to pass through the canal has increased by 280% since June, going from an average of 2.5 days to approximately 9.5 days.
That means the best way to maintain smooth transits through the canal is to maintain effective communication between carriers and the port. “Shippers who proactively schedule appointments and maintain robust communication channels with the canal experience significantly fewer disruptions compared to those who infrequently use this route. The vessels that are most impacted by the new restrictions are non-booked, so shippers should be proactively booking vessels planned to pass through the canal,” project44 said.
But as the “Condition 3” restrictions wear on, the penalty for lacking that communication could be increasingly severe. Many ships may begin to look for alternate shipping routes or lighten their loads to carry less weight and comply with draft limits, according to David Spencer, VP of Market Intelligence at Arrive Logistics. And those steps could have ripple effects throughout U.S. markets.
“In general, ocean shipping delays tend to cause more of a funnel effect on import volumes, essentially throttling associated demand. Equipment shortages were a major headache as a side effect of COVID-19 related delays, which created a lot of interesting trends with cross docking, warehousing, and drayage. We would probably see some of those trends return as well as a result,” Spencer said.