Panama Canal Plans to Cut Transits by 40 Percent

Padmesh Prabhune
The Panama Canal Authority has released plans to drastically scale down transits at the canal, phased in over the next three months as it reports water levels have continued to decline to unprecedented levels for this time of the year. The current plan would see transits reduced by 43 percent by February 1, 2024, with large containerships, and LNG and LPG carriers, likely to be among the most impacted by the new round of cuts.
“The recorded precipitation for October has been the lowest on record since 1950,” writes the Panama Canal Authority in its new advisory. They are reporting that the rainy season was late in starting and with less than a month left is likely to fall far short of normal levels. October’s rainfall is 41 percent below normal levels resulting in 2023 ranking as the second driest year on record. Equally concerning for the canal’s operations are long-range weather forecasts showing that they can expect 38 percent less rain for the rest of the year.
According to Panama Canal authorities, the drought requires them to reduce the number of daily transits from 29 to 25 ships and in the proceeding weeks, they will reduce vessels transits even more until it declines to 18 ships a day in February. That represents between 40%-50% of full capacity.
After cutting the maximum draft of vessels from 50 feet to 44 feet, 39 feet at the Panamax Locks, the authority has been working to maintain the current levels. They decided to reduce the number of daily transits while also adopting water-saving and conservation measures. They highlight the addition of water-saving basins at the Neopanamax Locks and a technique of cross-filling at the Panamax Locks.
The largest vessels that transit the Panama Canal, including containerships and LPG carriers will see transit cut by a third while the “supers,” which include LNG carriers, will see the number of daily trips reduced by more than 40 percent.
Analysts are highlighting that the cuts could impact the gas carrier segments especially hard. Rates for VLGC have already reached record highs with reports saying it is mostly likely to impact propane and to a lesser extent butane shipments. The cuts will also come at a peak shipping season with much of the Northern Hemisphere in winter and normally driving strong demand for gas imports. It also comes as LNG use continues to rise in response to tightening environmental regulations on traditional fossil fuels and emissions.
-Marex Media