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What if Panama Canal droughts are the new normal?

The current low level of water is unprecedented, says the ACP. But in an era of climate change, ‘unprecedented’ happenings have an alarming propensity to set precedents anew

Until now, shipping has always found a workaround to restrictions on using this key waterway. But it won’t be able to do so indefinitely

THE six-day closure of the Suez Canal after the Ever Given (IMO: 9811000) grounding in 2021 sent the finely calibrated global logistics chain haywire. Imagine the consequences if the world’s other key waterway were out of action for weeks on end.

Thankfully, the drought that is hitting the Panama Canal — officially heralded as “unprecedented” by the Panama Canal Authority, or ACP from its Spanish acronym — has not brought operations to anything like a standstill.

The authority has been forced to decrease availability of transit slots, impose restrictions on heavy loads and reduce maximum draughts, all of which has inevitably lengthened delays for many vessels.

The impact is uneven between segments. Prebooked vessels, especially boxships, are still getting through. Bulk carriers, by contrast, are facing waits of up to 20 days.

What seems to be happening is that the lines are willing to stump up higher transit charges because of the high value and time sensitivity of their cargoes.

Bulkers laden with lower value commodities are readier to wait things out. For some, there are the options of ballasting through the Suez Canal or around the Cape of Good Hope instead.

Senior figures in the liquefied petroleum gas sector have warned at industry conferences that their ships have found themselves at the back of the queue, and that there is potential for ‘more disruption than we have ever seen before’.

So far, the anticipated disruption has not materialised. But while repercussions appear small to date, they are expected to grow as liquefied natural gas charter rates approach their usual winter spike.

Some LNG charterers are opting to use the Cape of Good Hope for US-Asia shipments rather than join the queue at the isthmus.

So far, so normal. LNG demand is off season, and although this is peak season for US box traffic, things are a little less busy than usual.

Short-term suspension of transits on account of casualties within the canal’s confines have historically been commonplace, and longer-term shipping people will recall the unavoidable hold-ups sometimes witnessed while expansion work was undertaken from 2007 to 2016.

But don’t draw too much comfort from things not being as bad as they could be. One day they might be.

In an era of climate change, “unprecedented” happenings have an alarming propensity to set precedents anew.

Greenhouse gas emissions have risen every year since the Paris Agreement was signed in 2015, and there is now a real chance that average temperature increases will bust the 1.5°C marker at some point in the 2020s.

More frequent, or even annual, Panama Canal droughts could ring in some changes, particularly for the box business.

Recent years have seen a shift in the discharge of containers bound for the US ex-Asia, with lines increasingly swerving the congestion and uneasy labour relations that typify the west coast and utilising east coast and Gulf ports instead.

The Panama Canal facilitates that effort, at least while it is easy to use. Throw a spanner in that mechanism, and Los Angeles and Long Beach could find renewed favour.

Southeast Asia-US east coast box trades are also ACP customers. But the choice between Panama and Suez facing operators is essentially even-stevens.

Determined Panglossians could even dismiss temporary bottlenecks as tonne-mile positive for many other vessel types.

Again, none of these are scenarios shipowners couldn’t live with. But don’t shrug off where all of this may ultimately lead.

Scientists have warned us that the hottest July in 125,000 years could soon seem relatively cool. A decade or two from now, the water shortage now afflicting central America could be fondly remembered as mild.

Future droughts may prove more protracted and more serious in extent, to the point where draught restrictions will rule out larger ships altogether, perhaps for months on end.

Meanwhile, global warming is also eroding the polar ice caps at a rapid rate, with catastrophic outcomes for global sea levels.

Shipping is already mulling the implications of Arctic routes that shave two weeks off Asia-Europe and Asia-US east coast transit times.

Whatever the commercial positives here, that should not be a subject for gallows humour, let alone celebration.

The key takeaway from the Panama Canal drought is this: humanity should not be trashing the planet on a scale that causes these things to happen and needs to take urgent steps to mitigate the damage.

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