The Panama Canal is experiencing a significant impact on global supply chains due to the country’s drought during its dry season, which lasts until May. The decline in transits through the canal has been a cause for concern, with restrictions on reservations in place. However, there is some positive news as more rain than expected in November allowed for an increase in reservation slots in December.
In December, there were 746 ship transits through both the older Panamax locks and the larger Neopanamax locks. While there was a decline in transits compared to November, the rate of decline slowed significantly. The Neopanamax locks, which took almost a decade to build and cost over $5 billion, saw a drop in transits, particularly in LPG shipping.
Container ship transits through the Neopanamax locks also decreased in December, albeit to a lesser extent. Dry bulk shipping, on the other hand, was the primary driver of declines in transits through the Panamax locks in December.
Overall, the average daily transits through both lock systems showed a significant year-on-year decline in December. The Panama Canal Authority announced an increase in reservation slots in January, which may help improve transit numbers. However, the current reservation schedule still remains heavily constrained due to the ongoing drought.
Despite the challenges, there are still liner services available through the Panama Canal, albeit with surcharges and reduced capacity. Some carriers have pivoted to routing via Panama on a ship-by-ship basis, offering importers a shorter transit time to the U.S. East Coast compared to services around the Cape of Good Hope. However, most container ships only use the canal on the fronthaul leg, delaying their return leg around the Cape of Good Hope.
