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Panama Canal finally begins to rebound after drought-driven dive

March transit data shows first month-on-month gain since July 2023

Despite positive momentum in March, neopanamax locks transits were 18%-20% below levels in the same month in 2022 and 2023, and panamax locks transits were down 36%. The nascent recovery has far to go

PANAMA Canal transits rose 12.8% in March compared with February — the first sequential gain since July 2023 — according to data released on Wednesday by the Panama Canal Authority (ACP).

The drought-stricken waterway handled 747 ships in March: 218 via the larger neopanamax locks, up 8.5% from February, and 529 via the older panamax locks, up 14.8%.

The caveat is that despite these gains, Panama Canal traffic remains drastically lower than normal for this time of year, and is still much lower than in October 2023, prior to restrictions on daily reservations slots.

The ACP’s prediction of a full recovery in traffic by 2025 hinges on a variable that is inherently difficult to predict: the weather. The ACP assumes moderate rain will ensue by the end this month, with precipitation intensifying over subsequent months.

“All modifications to restrictions will be contingent on the forecasts. If rains are short of expectations, the canal could retain or apply further restrictions to either daily passage or draught,” the ACP conceded on Wednesday.

Still a long way to go

Transits via the neopanamax locks bottomed out in January, with March adding to February’s gains. The neopanamax locks averaged seven transits per day last month, according to ACP data, up 2% from February and 15% from January.

There is still a long way to go, however.

Viewed from a seasonal perspective, March neopanamax transits were down 22% from March 2023 and 18% from March 2022. Viewed in terms of recent reservation restrictions, March neopanamax transits were down 28% versus October 2023, the month immediately prior to those restrictions.

At the panamax locks, there were an average of 17.1 transits per day in March, the first sequential gain in eight months.

That’s the good news. The bad news is that there’s even more lost ground to regain for these locks than on the neopanamax side.

Last month’s panamax locks transits were down 36% versus both March 2022 and 2023, and down 24% versus October 2023.



Neopanamax locks transits by ship type

The neopanamax locks were specifically built to serve larger containerships carrying goods from Asia to the US. The other two big customer segments — liquefied natural gas carriers and very large gas carriers transporting cargoes from the US Gulf to Asia — were not part of the original business plan for these locks. They were added in later.

ACP data shows how scarce fresh water is being used to facilitate the waterway’s most important customer base: liner operators with larger containerships.

There were 118 containership transits of the neopanamax locks in January. Last month, there were 146, up 24% from January and pulling closer to the pre-restrictions level of 164 in October 2023. March’s neopanamax containership tally was only 11% below October’s.

LNG carrier moves through the neopanamax locks remain negligible. Automatic Identification System data shows that US LNG is either moving across the Atlantic to Europe or around the Cape of Good Hope to Asia.

Panama’s VLGC business is bouncing back, albeit at a slower pace than containerships. There were 57 VLGC transits in March, up 16% from January’s low.

AIS data shows that VLGCs are taking either the Cape of Good Hope or Panama Canal route on the laden fronthaul leg from the US to Asia, with more than twice as many VLGCs now opting for Panama as opposed to the Cape of Good Hope.

On the backhaul Asia-US run, AIS data shows almost all VLGCs in ballast continue to use the Cape of Good Hope route, not Panama.



Panamax locks transits by ship type

The older panamax locks cater to a much broader array of vessels. Drought-driven declines are highest in three segments: dry bulk, chemical tankers and smaller containerships.

The plunge in dry bulk business is by far the most important factor for the panamax locks, accounting for the majority of the total decline over the past five months.

Bulkers carrying US grains to Asia overwhelmingly switched to the eastward route, initially opting for the Suez Canal then changing course yet again to the Cape of Good Hope due to Houthi attacks.

Bulker transits through the panamax locks hit a nadir of 54 in February, then rose 22% to 66 in March, according to ACP data. That is still 60% below the 164 bulker transits in October.

Chemical tanker transits jumped 28% in March versus February but were still down 16% versus October.

Transits of smaller containerships via the panamax locks — unlike most other vessel categories — showed no improvement last month. They continued to fall, to 70 transits in March, down 26% from October.


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