Additional Fees | Panama Canal faces drought threat, implements shipping restrictions, major shipping companies update their route pricing tables
Panama Canal implements shipping restrictions due to drought, leading to updated pricing tables from major shipping companies
The Panama Canal Authority (ACP) has announced that the rainfall near the canal and the lakes that supply it with water have been less than 50% of the normal level from February to April this year. As a result, ACP plans to implement water consumption restrictions along the Panama Canal.
It is reported that at least 5% of global maritime trade passes through the Panama Canal locks every year. In April, container ships accounted for 45% of the transportation volume of new Panamax vessels that used the Panama Canal.
The severe drought has led to weight restrictions on large ships starting from May 24th and further reduction of allowed cargo from May 29th.
Panama Canal water levels have dropped to the lowest level in 20 years
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Starting from May 24th, the maximum draft of new Panamax vessels (the largest ships that can pass through the canal) will be reduced from the already restricted 13.71 meters to 13.56 meters. On May 30th, the draft restriction will be further reduced to 13.41 meters.
According to Bloomberg, it is expected that the cost of transit through the canal during the summer will further increase, which may cause shippers to face a double blow of higher freight rates and reduced loading capacity.
Currently, some shipping companies have announced new charges for goods transported on this route in response to the canal restrictions. At least four shipping companies, including CMA-CGM and HPL, have announced weight restrictions or container fees of $300 to $500 per container, effective from June 1st.
With the increasing restrictions, more operators may follow suit. These measures may result in delays and higher costs for goods transported through the canal.
Many shippers have proposed using the all-water route via the Suez Canal from Asia to the US East Coast as an alternative in the coming months, or using ports in Southern California to load containers onto trucks or trains heading to population centers in the Midwest and East Coast.
According to meteorological experts, the Central American El Niño phenomenon is imminent, and the water level in the lakes will further decrease, making the impact on canal shipping worse. Sellers can adopt multi-channel logistics methods to meet different logistics needs and reduce logistics costs.
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