The restrictions in the Panama Canal will continue for a year

restricciones en el Canal de Panamá

Inspenet, September 2, 2023.

Due to the scarcity of water, the restrictions in the Panama Canal regarding the navigation of ships will be maintained for a period of one year . This measure has resulted in congestion in the accesses to this route through which approximately 6% of global maritime trade transits.

In an interview with AFP, Ilya Espino, deputy administrator of the Panama Canal, indicated that the possibility of applying this restriction for one year is currently being evaluated, unless significant rainfall is recorded in the Canal hydrographic basin in the months of September, October and November, which would allow the recovery of water levels in the lakes. This decision gives Canal users and customers a period of one year to plan their activities.

Previously, approximately 40 vessels were allowed through per day, but this number has now been reduced to a maximum of 32. In addition, the canal administration has decided to lower the permitted draft for vessels to 44 feet (13.4 meters), which is a reduction of two feet compared to the previously permitted draft.

The direct consequence of this reduction in traffic has been the formation of long queues of boats waiting to cross. In normal situations, up to 90 ships used to wait for 3-5 days without restrictions. However, due to the current situation, the number of ships waiting has risen to around 160 and the waiting days have been extended to 19 in some cases, although these numbers have decreased significantly in recent times.

Vessels that cross the Canal have the option of securing one of the available spaces in the daily quota provided by the route. Another possibility is to participate in an auction, in which the participant with the best offer can obtain one of the available turns.

In certain cases, ships arrive without having previously made a reservation, resulting in the need to wait in line for several days until permission to begin transit is granted.

“We easily handle a queue of 90 vessels waiting, but 130 or 140 vessels cause us problems and cause delays,” Espino acknowledged.

The emergency situation generated responses even from the president of Colombia, Gustavo Petro, who went so far as to affirm that the Canal was inoperative, and from the president of Mexico, Andrés Manuel López Obrador.

“We have a restriction in Panama as we have had on other occasions, but it is not that the Panama Canal is closed ,” replied the Panamanian president, Laurentino Cortizo.

However, the limitations have raised concerns that shipping companies may choose to modify their route to transport their cargo. If the costs of using the canal under these conditions turn out to be “excessive”, users “could explore route alternatives, and the route that normally competes with us is the Suez Canal route,” Quijano said.

“If we don’t adapt, then we are going to perish,” the Canal’s administrator, Ricaurte Vásquez, recently stated.

The restrictions in the Panama Canal would bring consequences

The limitations could result in a decrease in the cargo capacity per ship and a prolongation of the freight transport time. The most notable impact would be a “potential increase in expenses”, although this will depend on the type of merchandise that each ship transports, according to Felipe Chapman, managing partner of the economic consulting firm Indesa, in an interview with AFP.

However, “the total volume of trade that goes through the Panama Canal is relatively small,” so “I wouldn’t think it would be a catalyst for inflation globally,” he adds.

Estimates suggest that next year the number of tons that will cross the Canal will be less than the 518 million registered in the previous year . Additionally, income from tolls could be reduced by around 200 million dollars , in contrast to the entry of more than 4,300 million that was observed in the previous fiscal year on this road.

“The impact on global trade figures, as it is a one-year situation, I don’t think it will be worse than the COVID pandemic was,” Espino added.


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