More than 200 ships are stuck on both sides of the Panama Canal after authorities limited sailings due to a severe drought.
The big ships, believed to carry millions of dollars’ worth of goods, are stuck in traffic, sometimes waiting weeks for the crossing.
Vessel tracking data highlights the scale of the problem with hundreds of vessels, mostly bulk or gas carriers, waiting near the Pacific and Atlantic canal entrances.
In order to save water, the water authorities have limited the number of daily passages through the canal to 32.
Panama will lose $200 million in revenue from the delays and could lead to a spike in US grocery and package prices as additional fees are applied to shipping costs.
More than 200 ships are stuck on both sides of the Panama Canal after authorities limited sailings due to a severe drought
Vessel tracking data highlights the scale of the problem with hundreds of vessels, mostly bulk or gas carriers, waiting near the Pacific and Atlantic canal entrances
The entrances on both sides of the Panama Canal are clogged and some ships have been backed up for more than 20 days.
Some shipowners have diverted their voyages to avoid the backlog.
The canal uses three times as much water as New York City every day and needs rain to replace it.
But the rainy season is yet to come in Panama, and the canal is experiencing its driest spell in more than a century.
Restrictions on the number of ships passing through have been extended until September 2.
“The delays change from day to day. “Once you’ve decided to go, there’s no reason to turn back or stray, so you can get stuck,” Tim Hansen, chief commercial officer at Dorian LPG, an operator of large gas carriers, told the Wall Street Journal.
Without enough rain, the ship passages are canceled and the lucky ones pay high premiums.
This increases transportation costs for cargo owners such as American oil, as well as Asian importers and gas exporters.
Ricaurte Vásquez Morales, the Panama Canal’s administrator, warned that the restrictions might have to remain in place until the rest of the year.
He said the drought could result in a $200 million drop in sales next year if low rainfall continues into the winter.
According to him, extreme rainfall or droughts are much more common than in the early years of canal operation.
This poses a major challenge for the Panama Canal Authority, which supplies water to around half of the country’s 4.5 million people.
“The channel communicates with its customers so that they can make the best decisions based on the information, even if it means temporarily having to choose a different route,” said Vásquez Morales.
“Demand remains high, demonstrating that despite water conservation measures, the Panama Canal remains competitive in most segments.”
The operators contracted with the US Army Corps of Engineers, who originally built the canal, and committed $2 billion over the next decade to divert four rivers into the waterway and make it easier for ships to pass through.
Three rivers already flow into the canal.
Container ships, which are the largest users of the canal, experienced no major disruptions.
Most enjoy preferential status as they work to fixed timetables and book crossings up to a year in advance.
The big ships, believed to carry millions of dollars’ worth of goods, are stuck in traffic, sometimes waiting weeks for the crossing
The entrances on both sides of the Panama Canal are clogged and some ships have been backed up for more than 20 days
However, some end up in chaos and have to pay many times the average toll.
Lars Oestergaard Nielsen, head of customer supply in America at shipping company AP Moller-Maersk, said: “We had two ships that could not be booked and it was quite expensive.”
“We went to an auction and paid $900,000 in addition to the normal $400,000 toll fee for each vessel crossing.”
Ships normally traverse the canal with an average draft of 50 feet, but this has now been reduced to 44 feet to accommodate drought conditions.
Large box ships have to cruise with fewer containers in order to cope with the shallower water depth. Smaller ships will be added to make it easier to transport the rest of the cargo.
Those that do not travel on fixed routes, such as bulk carriers and gas carriers that are booked to transport goods at short notice, must expect to end up with the longest delays.
Oslo-based company Avance Gas operated 17 vessels and had to relocate 75 percent of its vessels carrying American exports of butane and propane.
Ships transporting these products to Asia move through the Suez Canal or around the Cape of Good Hope.
“Waiting is one thing, but so is uncertainty,” said CEO Øystein Kalleklev.
In order to save water, the water authorities have limited the number of daily passages through the canal to 32
Panama will lose $200 million in revenue from the delays and could lead to a spike in US grocery and package prices as additional fees are applied to shipping costs
“It’s risky to repair a ship without a fixed itinerary because you can lose the contract if you wait too long.”
The Panama Canal is a big mess these days. Twenty days of queuing is unprecedented at this time of year.”
Huge ships carrying bulky goods like coal and iron ore get stuck in traffic. They are usually owned by medium or small operators and are not a priority.
According to shipping companies and experts, the restrictions could put pressure on prices for consumer goods as delays and additional fees increase shipping costs.
This could lead to higher prices and less choice for American consumers.
The Panama Canal is important for transporting consumer goods from Asia to the United States, especially before peak seasons such as Christmas.
It also allows for faster shipment of US goods to Asia and the Pacific coast of South America.
The Panama Canal has a 40 percent market share of containers shipped from Northeast Asia to the US East Coast.