Panama Canal Becomes “World’s Worst Traffic Jam”
(21 August 2023 – Panama) Panama’s worst drought in over a century has cut crossings and caused over 200 vessels to become stuck on either side of the arterial global trade bottleneck.
Dubbed “the world’s worst traffic jam”, the canal’s Pacific and Atlantic ocean entrances are peppered with cargo ships backed up for close to a month. Most are bulk cargo or gas carriers generally booked on short notice as many logistics operators opt to reroute traffic “the long way” past the Cape of Good Hope or via the Suez Canal to importers in Asia to avoid the backlog. Containerships have not been directly impacted given their preferential status and fixed scheduled booked up to a year in advance, however there are issues navigating the traffic backlog and paying higher tolls.
Panama Canal Chief Administrator, Ricaurte Vásquez Morales, stated that the restrictions could stay in place until the end of 2023 if severe drought conditions persist. The canal uses three times as much water as New York City each day and relies on rainfall to replenish it. If rainfall remains limited, ship transits are cut and those that cross incur significant premiums that inflate transport costs for cargo owners such as Asian importers and US oil and gas exporters.
Costas Paris reports for the WSJ that the canal administration has hired the US Army Corps of Engineers, the original canal builder in 1914, and allocated US$2 billion over the next decade to divert four rivers into the canal in addition to the three already feeding it.
“The delays are changing by the day. Once you make a decision to go there is no point to return or deviate, so you can get stuck” Dorian LPG Chief Commercial Officer, Tim Hansen.
“Waiting time is one thing, but it’s also the uncertainty. It’s risky to fix a ship with no firm itinerary because you can lose the contract if the wait is too long. The Panama Canal is a big mess these days. Twenty days in a queue is unprecedented at this time of the year” stated Avenue Gas CEO, Øystein Kalleklev.