Summary:
- On November 1st, vessel capacity through the canal was further restricted to 25 vessels daily, down 30% from its original capacity.
- The number of vessels anchoring around the ports of Balboa and Colón has increased by 143% since the beginning of September.
- Average transit time for northbound container vessels has increased 50% in the past week but has increased as much as 250% for some vessels.
Panama Canal Shipping Regulations Increase Congestion and Transit Times
The Panama Canal, a critical conduit for global supply chains responsible for 40% of worldwide vessel traffic, is grappling with persistent drought conditions. Sanctions on the canal’s operations have resulted in restrictions on daily vessel passages. In August, the daily allowance dropped from 36 to 32 vessels, and a subsequent reduction on November 1 further limited it to 25 vessels per day—a more than 30% reduction in capacity. These new restrictions are causing congestion around the canal and leading to increased transit times.
Vessel Congestion Surrounds the Canal
The recent reduction in capacity has triggered a notable buildup of container vessels awaiting passage. As of November 30, 2023, more than 40 container vessels are in line, waiting to navigate the canal.
Vessel Anchorage at the Ports of Colón and Balboa
Due to congestion, an increasing number of vessels are anchoring outside the Port of Balboa (southern end) or the Port of Colón (northern end). The chart below illustrates the weekly increase in vessels anchoring in the area.
Previously in August, this number did start to increase due to both high volumes during peak ocean season and the capacity restrictions at that time, which were limited to 32 vessels per day. The numbers of vessels that were anchoring saw some volatility throughout the peak season, but despite peak season ending in October, these numbers have skyrocketed in November as a result of the additional restriction to 25 vessels per day.
The week of November 12th exceeded 90 vessels having to anchor in either Balboa or Colón, which is a 100% increase from early June and a 143% increase since the week of September 17th. There is a large likelihood that this number will remain high as backlogs of vessels build up waiting to pass.
Extended Transit Time through the Panama Canal
Despite previous restrictions implemented in the Panama Canal, the average transit time through the canal has stayed overall steady, particularly for northbound traffic which consists mainly of imports to the US East Coast. The Panama Canal Authority reiterated that the vessels seeing the most impact from previous restrictions were ones that were not scheduling passage ahead of arrival at the canal. With the reduction to 25 vessels per day, this no longer seems to be the case.
The week of November 19th shows a 250% increase in the maximum transit time of the week, jumping from 1.7 days all the way up to 6. While this number could be an outlier and has been in some weeks past (the week of September 17th is an example of where there was a spike in the maximum without change to the average), there is still a 50% increase in average transit time, showing that the increase is widespread rather than an anomaly.
Outlook and Recommendations
The Panama Canal continues to present challenges for global supply chains, with no relief in sight. Despite lower volumes of ocean cargo being shipped presently, the canal faces the highest transit times and anchorage rates in recent history.
With more restrictions anticipated due to the continuing drought, it’s advisable to explore alternative shipping routes, especially for time-sensitive cargo. Shippers in the United States may find cross-country rail and trucking faster than waiting for canal passage. In recent years, there has been a shift to leverage East Coast ports while West Coast battled high congestion rates and labor strikes, but project44 predicts most volume to shift back to the West Coast as complications with the canal continue.
For questions or comments: press@project44.com
