CNBC by Lori Ann LaRocco 11/3/2023
KEY POINTS • The Panama Canal Authority is starting new cuts in vessel traffic which will reach over a 40% reduction of vessels by February due to an ongoing drought.
• "This will be the worst El Nino recorded in recent history," Panama Canal Authority Administrator Ricaurte Vásquez Morales recently said.
• Forty percent of all U.S. container traffic travels through the Panama Canal's locks every year and a total $270 billion in trade.
Starting Friday, the Panama Canal Authority is implementing additional vessel reductions in an effort to conserve water as a drought exacerbated by a severe El Nino weather system continues to plague water levels in the locks of the key global trade conduit.
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. Under normal conditions, between 34-36 vessels traversed the canal daily. The drought and vessel reductions are having a major impact on the flow of trade, according to data from CNBC Supply Chain providers.
According to Project44, shipping containers going through the Panama Canal to the U.S. East Coast are being delayed in select ports, with the Port of Charleston seeing the longest in delays.
The Panama Canal is popular for East Coast trade because it is faster than other options. The shipping time for ocean cargo from Shenzhen, China, to Miami, Florida, using the Suez Canal takes 41 days. Traveling through the Panama Canal takes only 35 days.
"With a reduced transit schedule and an average of 26 daily arrivals by commercial ships per day on the Pacific side of the canal, and an average of 8 daily arrivals by commercial ships per day on the Atlantic side of the canal, the likelihood of cargo waiting idle will increase," said Captain Adil Ashiq, head of North America for MarineTraffic.
According to MarineTraffic, wait times have increased on the Atlantic side from last week on average by 30% (0.4 days to 0.6 days) and on the Pacific side, wait times have increased to 2.2 days.
The delays are leading shippers sending cargo to U.S. East Coast and West Coast ports to make alternativee plans, says Alan Baer, CEO of OL USA.
More:
https://www.cnbc.com/amp/2023/11/03/panama-canal-drought-hits-new-crisis-level-amid-severe-el-nino.html
