Panama Canal transit confronted with delays as demand surges
Since the Panama Canal debuted its larger Neopanamax locks in 2016, the three heaviest users have been container ships, liquified natural gas (LNG) carriers and liquefied petroleum gas (LPG) carriers. Now, transit demand for all three segments is simultaneously surging. On top of that, COVID issues are reportedly affecting canal operations.
The consequence over the past month and a half: transit delays. The good news for containerized cargo shippers is that container lines have reserved booking slots. The delays are affecting ships without reservations.
The good news for LNG and LPG shipowners is that delays are actually a tailwind for returns. Every day a bulk-cargo ship is stuck waiting at anchorage off Panama is a day less it can vie for spot contracts at the end of its voyage. Less competition equals higher rates.
Panama Canal congestion is also spurring more LNG and LPG carriers to take the long route to Asia around the Cape of Good Hope. Longer voyages soak up more vessel capacity, another plus for rates.
Increasing Panama transit requests and Covid-19 result in congestion
During the latest conference call of Oslo-listed BW LPG, the company’s executive vice-president, Pontus Berg, attributed delays to bad weather, high traffic and “partly … to COVID.”
Argus Media reported that delays were partially driven by “tugboat crew staffing complications induced by COVID-19 [that are] limiting the number of simultaneous transits just as seasonal factors like increased container shipping and higher LPG heating are increasing demands on the canal.”
FreightWaves asked the Panama Canal Authority (ACP) for comment on reports of COVID-related issues impairing operations. The ACP responded that it is “taking all the necessary safety measures in response to the pandemic” and “has made operational adjustments to increase daily transits while preserving safety measures.
Panama Authorities confirm new operational adjustments have been implemented
Asked about causes of congestion, it cited a confluence of higher container traffic and LNG traffic. “Like at many ports around the world, we see this as a temporary situation driven by the effects of the pandemic [on consumer demand].”
The ACP also blamed the weather. “Hurricanes … delayed shipments that then arrived at the Panama Canal simultaneously,” it said. It added that Panama is at the end of its rainy season “and there have been more days with seasonal fog than last year.
The ACP asserted that its operational adjustments have now reduced delays. “The waiting time for vessels without reservations is five to six days on average, down from 10 days in mid-October,” it reported.
Container vessels do not suffer from the Panama congestion
In the container sector, the spotlight has been the booming trans-Pacific trade from Asia to the West Coast. But there are also heavy flows from Asia moving to the East Coast via the Panama Canal. With all the delays at California ports, the last thing container shippers need is delays on the canal.
According to the latest available statistics, 137 container ships transited the Neopanamax locks during the month of October. Including all ship types, there were 315 transits via the larger locks. That’s the highest monthly tally since these locks opened — despite the congestion that began that month.
FreightWaves asked Maersk and another container-industry source whether they saw any canal delays affecting schedules. Both reported that so far, they did not.
According to Maersk, “No issues [have been] reported and we are not experiencing any delays on Panama Canal transits if vessels are booked on time, which means that we must book 14-21 days in advance, depending on ship size.”