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Panama Canal Drought Disrupts Trade

Panama Canal Drought Disrupts Trade - Universal Logistics Trade Alerts - December 7, 2023

Toronto, December 7, 2023

Panama has been experiencing the worst drought in 50 years, which is restricting capacity at the Panama Canal, an important route for cargo to/from Asia to the US East Coast. On an ordinary day, approximately 36-38 ships transit the Panama Canal, however due to the restrictions caused by low water levels, they are only able to accommodate 22 ships per day.

In February 2024, they are further reducing the capacity to 18 ships per day. Congestion continues to mount on a daily basis with a rising number of ships facing delays that are set to worsen over the next two months.

Carriers are facing three options on how to manage this issue:

  1. Continue on their normal routing via Panama Canal with transit time extended by 2-6 weeks depending on congestion.
  2. Divert vessels to go through the Suez Canal with transit time extended by 5 to 12 days depending on loading port.
  3. Divert vessels to go via the Cape of Good Hope taking the long way around Africa with at least an additional 3 weeks delay of transit time.

Hapag Lloyd and COSCO have announced that they are going to impose a Panama Canal Surcharge in January 2024, with MSC announcing that they are implementing the fee on December 15, 2023.

For more information, please call Debbie McGuire, Director – Freight Solutions at (905) 882-4880, ext. 1308.

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