Panama Canal temporarily restricts shipping

Ships move through the Panama Canal at Pedro Miguel

On August 10, the Panama Canal Authority (ACP) announced that it would limit the number of small vessels registered to pass through the old locks of the canal from 16 per day to 14. This will allow vessels that have not been booked to pass through the Panama Canal in order to reduce congestion and congestion. The number of vessels passing through the largest locks of the canal will remain unchanged.

In addition, the Panama Canal also maintains a policy of limiting the total number of ships allowed to pass through the canal each day to 32, instead of the usual 36. The ACP will continue to apply the draft limit of 13.41 m (44 feet) for neo-Panamax container ships - ships designed to fit through the canal's locks. The ACP noted that the limit will remain in place until weather conditions change significantly in 2024. Previously, in June, the ACP postponed the draft limit of 13.3 m, meaning these ships would have to be reduced in weight to have more buoyancy.

The Panama Canal is an 82 km long artificial waterway in Panama that connects the Atlantic Ocean to the Pacific Ocean. The creation of this project has contributed greatly to global shipping. Before the Panama Canal was built, ships often had to go around the southern tip of South America, which was a much longer and more dangerous route. Traveling through the Panama Canal has shortened the shipping route by more than 13,000 km, saving costs and time.

About 70% of the ships passing through the canal originate from or are headed to the United States, where many large retailers such as Walmart, Amazon and Target are stocking up for winter sales. Any disruption or delay in the canal would affect global shipping.

The congestion of commercial vessels waiting to pass through the canal has forced shipping companies to seek alternative routes. As of August 10, 161 vessels were operating near the canal, up from about 90 during the rainy season. Vessel data provider Refinitiv Eikon showed at least 40 additional vessels approaching the canal.

The Panama Canal is facing its biggest water crisis ever due to climate change. The ACP said the canal has experienced a prolonged dry season over the past six months, increasing evaporation, while there is a high probability of an El Nino event this year. Panama typically experiences heavy rains in July, and the current lack of rain is considered “unprecedented.”

According to the ACP's previous forecast, the revenue of the world's busiest maritime trade route will decrease in the upcoming fiscal year after the number of ships passing through it decreased due to the prolonged dry season. It is estimated that in the fiscal year running from October 2023 to September 2024, the revenue of the Panama Canal will decrease by between 150 million and 200 million USD, down to 4.9 billion USD.

According to VNA