Panama Canal Water Crisis Forces New Shipping Route Changes

The deteriorating water situation at the Panama Canal is beginning to affect port calls, cargo routes and terminal planning throughout the Americas as authorities introduce further restrictions on daily transits.

The canal reduced daily crossings to 34 vessels last week, with that figure set to fall to 32 from September 15. Under unrestricted conditions, approximately 40 ships normally transit each day. Additional cuts could follow if rainfall remains below expectations in the coming months as a severe El Niño develops.

The restrictions come at a challenging time for ports handling US agricultural and energy exports. Shipbroker BRS said in a recent report that tanker waiting times have almost doubled compared with earlier this year. MR2 tankers are particularly affected as record volumes of US refined products are shipped to Asian markets.

The situation is placing even greater pressure on gas shipping. Analysts at Scandinavian bank SEB said some VLGC operators are already resorting to improvised cargo transfers or taking significantly longer routes around South America or the Cape rather than facing lengthy queues or paying exceptionally high auction premiums for canal slots.

The growing value of guaranteed access was recently demonstrated when SK Gas reportedly paid a record $5.3 million to secure a Panama Canal transit for the LPG carrier G. Spirit.

Dry bulk shipping is also being affected. Ursa Shipbrokers estimates that just 162 bulk carriers passed through the canal during August, representing a 32.5% decline compared with the same month a year earlier.

For US Gulf grain exporters, diverting cargoes from New Orleans to China via the Cape of Good Hope can add almost 19 days to a voyage. The additional sailing time could affect berth scheduling and cargo movements at both departure and destination ports.

The restrictions coincide with Ilya Espino de Marotta becoming the first woman to head the Panama Canal Authority. Her longer-term plans include development of the Río Indio reservoir, new terminals on both the Atlantic and Pacific sides of the canal, and investment in wider logistics infrastructure.