Panama Canal: Containerships benefiting from other sectors’ exodus

Containerships are just about managing to maintain daily transit averages through the Panama Canal, while other sectors reroute.

While most eyes are on the situation in the Red Sea and diversions from the Suez Canal, it is worth keeping an eye at happenings at the world’s other troubled chokepoint, the Panama Canal.

Monthly data from the Panama Canal Authority (ACP) shows that while the total number of transits across all commercial shipping sectors is declining (see Figure 1), containerships are growing their share as other shipping sectors are increasingly bypassing the waterway. This has enabled containerships to broadly maintain its daily average of recent years.

In a bid to preserve levels in the canal’s watershed, which supplies water to half of Panama’s population, since March 2023, the ACP progressively reduced capacity in the form of draft and daily transit restrictions.

Higher than usual temperatures in the Atlantic Ocean, along with the El Niño phenomenon and a delayed rainy season are the reasons behind why there are fewer ships using the canal and why some are being forced to lower cargo weight in transit.

ACP’s data for December 2023 shows that monthly transits (both locks) were down by about 25% compared to October 2023, or put in numbers, only 746 transits versus 1,002. In December 2022, there were 1,281 transits, so the latest figures represents a 42% YoY decline.

Currently, vessels transiting Panama’s Neopanamax locks are allowed maximum drafts of up to 44 feet (50ft max in normal conditions), while vessels transiting the Panamax locks have no draft limitations from the 39.5ft cap.

It is estimated that containerships lose approximately 350 teu capacity for every foot of lost draft. For the biggest containerships able to sail through the Neopanamax locks this could reduce the payload by around 2,000 teu.

On 15 December 2023, the ACP reversed an earlier decision to reduce the number of daily transits again. Rather than dropping to 20 transit slots in January and 18 in February, the ACP instead increased the number of transits to 24 per day on 1 January 2024, from 22. This is still a long way down from the 35-40+ daily transits seen before restrictions were imposed last year.

Containerships have mostly avoided the long queues outside the Panama Canal and the hugely expensive transit auctions because of the pre-booking system, but there were sufficient operational delays to prompt THE Alliance to announce a switch to Suez on three Asia-USEC services (this was before the Suez diversions).

Even though the ACP has increased the number of daily transits to 24 that will still make it challenging for containerships, which saw per day transits drop to an average of 7.4 in both November and December, down from 8.4 in October.

This is not too far off from containerships’ average daily transits of 7.7 (Fiscal Year 2022) and 7.6 (FY 2023) – note ACP’s fiscal years run from October to September.

Containerships’ share of total monthly transits increased to 30.6% in December, up nearly 5 percentage points from October. In the ACP’s two previous fiscal years, containerships’ share was exactly 19.8%.

Effectively, containerships are finding it easier to reserve slots as some other sectors (most obviously dry bulk) continue to vacate the route, even if carriers would like more.

Our view

The situation is obviously very fluid and further draft restrictions could be announced at any time, but it seems that for containerships at least, the Panama Canal bottleneck is proving much less restrictive than it might otherwise have been.
Source: Drewry