Panama Canal Turns From Trade Catalyst to Chokepoint
By Ruth Liao. December 5, 2023 at 7:00 AM EST
For more than a century, the Panama Canal has been a catalyst for consumer goods and raw materials flowing between the Americas, Asia and beyond. Thanks to climate change, it’s now a chokepoint.
A drought is reducing water levels in a nearby lake used to manage the depths for cargo ships passing through its locks. That’s led to tonnage restrictions and fewer vessels transiting the shortcut each day, causing delays. Those unwilling to wait have two options: pay hefty fees to jump the queue, or sail a much greater distance around South America, Africa or through the Suez Canal.
Panama Canal Jam Spurs Alternate Ship Routes
Shippers face higher costs with either increased voyages or surging canal fees.
Hapag-Lloyd, the world’s No. 5 container carrier, recently started a “live ticker” showing the rerouting of its ships.
Such choices add costs, creating headwinds for central bankers around the world who are struggling to tame inflation.
According to the IMF’s PortWatch congestion monitor, the number of daily transits through the canal has declined by about one-third since Aug. 1 to 22 vessels. That’s expected to go down even more in coming months, reaching 18 daily crossings by Feb. 1, according to Clarksons Research.
Falling Water Means Fewer Panama Canal Transits
Daily ship crossings have declined by about one-third since Oct. 1
The snarl will only worsen in the coming months as Panama enters its annual dry season, which typically begins in December and lasts until April or May.
“Transit restrictions appear likely to remain in place for some time to come, with the rainy season in Panama falling from May to December, and the months with the greatest average rainfall being October and November,” according to a Dec. 1 research note from Clarksons. “Restrictions may not be significantly eased until the second half of 2024 or later.”
Further Restrictions in Panama Canal Announced
During Q2 2023, the Panama Canal Authority announced it would reduce draft from 14.94 meters to 13.41 meters. Despite several measures to conserve water taken over the previous months, lack of precipitation in the area is affecting the water level of the Panama Canal. Consequently, the Panama Canal Authority has recently confirmed further restrictions regarding the number of vessels crossing the canal. Many steamship lines have also announced delays, restrictions and surcharges.
MarineTraffic.com 11/29/23
Tuesday, November 21, 2023
CMA CGM informs its customers that the Panama Canal continues to suffer from severe drought, consequently, the Panama Canal Authority has recently announced further restrictions.
During Q2 2023, and despite several water conservation measures, the canal draft was reduced from 14.94 to 13.41m.
The lack of precipitation over the summer months has forced the Panama Canal Authorities to reduce the number of vessels transiting per day. As a consequence, by January 1st 2024, the booking windows for transiting the Neopanamax locks will be reduced by -30%.
These restrictions combined with an increase in the Canal Tariff implemented earlier in the year, are taking a severe toll on CMA CGM’s operations.
PANAMA CANAL SURCHARGE
MSC CUSTOMER ADVISORY
Geneva, Switzerland, 23 November 2023
Dear Customers,
During Q2 2023, the Panama Canal Authority decided to reduce draft from 14.94 to 13.41. Despite several measures to conserve water taken over the last months, lack of precipitation in the area is affecting the water level of the Panama Canal. Consequently, the Panama Canal Authority has recently confirmed further restrictions regarding the number of vessels crossing the canal.
These restrictions, combined with the increase of the Canal Tariff implemented earlier this year, are having a direct impact on overall MSC operations costs.
Transpacific Eastbound: Panama Canal Adjustment Factor
23rd November 2023
Dear ZIM Customer,
The Panama Canal Authority has recently announced further restrictions on vessels crossing the canal, following the historically low water level in Panama.
The number of vessels passage the Neopanamax locks will be further reduced, combined with an increase of the Canal Tariff implemented earlier this year, increased our operation cost substantially. To recover the extra expenses on Asia to US East coast and US Gulf services crossing the Panama Canal, Zim will implement a new Panama Canal Adjustment Factor (PCA), starting December 15, 2023.
Here’s an update on the Panama Canal situation
In the face of the most severe drought the Panama Canal has experienced in half a century, we are working towards adjusting our operational outlook to support your cargo planning. The drought has had a serious impact on container ships by posing draft limits whereby space and weight allocations are challenged. In addition, the daily vessel transit has been capped to a specific number of vessels per day, presenting additional challenges to transit the Panama Canal on time.
Despite our preparations, the canal’s restrictions present uncertainties, and therefore, we are constantly evaluating the operational situation, including regular discussions with the authorities to obtain the latest information. In view of this situation, our teams are engaged in taking all the necessary measures to continue supporting your supply chain requirements.
ZIM Re-Routes Ships to Avoid Yemeni Coast
Mike Schuler, gcaptain.com
Israeli shipping line ZIM Integrated Shipping Services Ltd. (NYSE: ZIM) says it will re-route vessels to avoid the Arabian and Red Seas amid threats to Israeli-linked ships in the region by the Yemen-based Houthi militant group.
The announcement comes after at least three ships have been targeted in the past week or so.
The company issued a statement Monday reiterating its continued commitment to serving the East Mediterranean and Israeli ports amid Israel’s war with Hamas.
“Operations to and from these ports will be maintained with the highest regard for safety protocols which are essential to safeguarding the interests of all stakeholders,” the company said.
However, the company said that in light of the threats, it is taking “temporary proactive measures” to ensure the safety of its crews, vessels, and customers’ cargo by re-routing some of its vessels, which will result in longer transit times.
“ZIM is closely monitoring the situation to address potential risks and ensure the ongoing safety and efficiency of its operations,” the statement said.
The announcement comes after a series of attacks on internationally-trading ships linked to Israeli businesses after Houthi’s leader threatened further attacks on Israel and Israeli ships in the Red Sea and Bab al-Mandab.
“Our eyes are open to constantly monitor and search for any Israeli ship in the Red Sea, especially in Bab al-Mandab, and near Yemeni regional waters,” Abdulmalik al-Houthi said in a broadcasted speech on November 14.
On November 19, the Galaxy Leader car carrier was hijacked by the Houthis and taken to Yemen’s Hodeidah port area along with its 25 crew members. The ship is still being held. Over the weekend, the chemical tanker Central Park was boarded by armed assailants in the Gulf of Aden, prompting a response from the U.S. Navy destroyer USS Mason. Five individuals now described as being of Somali nationality were captured in the incident, raising questions about the origin of the assailants. Following the rescue, two ballistic missiles were fired towards the Mason and Central Park, but the missiles landed in the water about 10 miles from the vessels.
In addition, on November 24 the Maltese-flagged M/V CMA CGM SYMI was reportedly attacked by an unmanned aerial vehicle (UAV) in the Indian Ocean, but did not sustain serious damage.
All three ships have links to Israel.
At least one ZIM ship, the MV ZIM Europe has been identified as re-rerouting down the west coast of Africa, presumably around the Cape of Good Hope, during a voyage from the U.S. East Coast to Port Klang, Malaysia.
Since Hamas’ brutal October 7 attack on Israel, U.S. Navy destroyers have shot down missiles and drones launched from Yemen on at least two other occasions.
ZXB – Vessel Diversion – Zim Savanah Voyage 20E – Updated
28th November 2023
Dear ZIM Customer,
Due to the ongoing restrictions in the Panama Canal and subsequent heavy delays, and in light of the threat to the safe transit of global trade in the Arabian and Red Seas, we wish to inform you that we have decided to divert the ZXB ZIM Savannah 20/E Voyage to sail via the Cape of Good Hope.
ZIM is taking temporary measures to ensure the safety of its crews, vessels, and customers’ cargo by rerouting some of its vessels. We make every effort to minimize disruptions and closely monitor the situation to ensure the ongoing safety and efficiency of operations.
Below is her tentative schedule for your reference:
Port | ETA |
Cartagena | 26/12/2023 |
Baltimore | 1/1/2024 |
Norfolk | 3/1/2024 |
New York | 5/1/2024 |
Boston | 7/1/2024 |
- All cargo bound for Mexico will be discharged in Shanghai to connect alternative service.
A separate notification will be sent to cargo owners for further connection details.
We thank you for your understanding on this matter.
Our customer service team and sales representatives are at your disposal for any inquiries.
USWC/USEC base port from 9/26 to 10/14
Wk40 (during long holiday) + wk41 (after long holiday), you can say 1st half of Oct, space capacity cut almost 50%
Shipping Line | Route | Blank Sailings (Week) |
Ocean Alliance | PSW | AAC4/CEN – wk41 omit, AAC2 – wk40 omit, AAS2 – wk39 & wk41 omit, AAS3 – wk40 & wk42 omit, AAC – wk40 & wk41 omit, SEA2 – wk42 omit |
PNW | OPNW – wk39 & wk41 no vessel, CPNW – wk40 & 41, no vessel, MPNW – wk40 & 41, no vessel, EPNW – wk40 omit | |
USEC | AWE1 – wk41 omit, AWE2 – wk39 & 40 omit, AWE3 – wk40 omit, AWE4/AWE7 – wk40 & 41, no vessel, ISE – wk39/41/42 omit | |
Gulf | GME – wk40 & 41, no vessel, GME2 – wk41 & wk42 no vessel | |
CMA EXX | wk41 omit | |
The Alliance | PSW | PS3/PS6/PSX – wk41 omit, PS4 – wk42 omit |
PNW | PN3 whole svc withdraw from Oct, PN4 – wk40 omit | |
USEC | EC1 – wk40 & wk42 omit, EC2 – wk41 omit | |
Gulf | EC6 – wk43, no vessel | |
MSK/MSC/ZIM | PSW | TP2 – wk41 omit, TPX & TP6 – wk40 omit |
PNW | TP1 – wk40 omit, ZNP – wk39/41/42 omit | |
USEC | TP16 – wk41 omit, TP12 – wk40 omit, TP10 – wk41 & wk43 omit | |
ZIM ZXB | wk39 & wk41 omit | |
MSC Santana | wk42 & wk43 omit | |
MSC Sentosa | WK40 & 41 omit | |
WHL | PSW | AA3 – wk39/40/42 no vessel |
USEC | AA7 – wk41 omit |
Canada West Coast Strike Ends
ILWU Canada Votes To Accept Port Labor Agreement
Excerpted from Reuters.com, August 5, 2023, by David Ljunggren
Dock workers in western Canada voted to accept an improved labor contract after a month-long dispute that affected trade and disrupted operations at the country’s busiest ports, their union said on Friday.
The vote was 74.66% in favor of the terms of the settlement, the International Longshore and Warehouse Union (ILWU) said in a statement.
Disagreements in contract negotiations have disrupted billions of dollars in trade, raising concerns about fueling inflation.
The union provisionally agreed to a new contract on Sunday, averting an immediate strike, but the agreement needed to be approved by workers.
The government had directed the Canada Industrial Relations Board to resolve the dispute after workers rejected a previous contract. Ottawa was seeking to keep two of Canada’s three busiest ports – Vancouver and Prince Rupert – open.
Canada’s Minister Of Labour Seamus O’Regan and the British Columbia Maritime Employers Association (BCMEA) confirmed that the ILWU had ratified the deal.
B.C. port dispute ends as workers vote to accept new deal
Excerpted from CBC.ca, June 6
Nearly 75 per cent of union members voted to approve the tentative agreement
Port workers in British Columbia have accepted a new tentative deal with their employers, bringing an end to a tumultuous, weeks-long contract dispute that has paralyzed industries and supply chains across Canada.
Late on Friday, the International Longshore and Warehouse Union Canada (ILWU) says the vast majority of its more-than-7,400 members voted to ratify a deal reached with help from the Canada Industrial Relations Board (CIRB).
The two-day vote closed at 6 p.m. PT on Friday.
“The results of the ratification vote for the tentative agreement show 74.66 per cent in favour of accepting the terms of settlement,” ILWU president Rob Ashton wrote in a letter posted to the union’s Facebook page shortly before 8 p.m. PT on Friday.
Both the ILWU and the employers, represented by the B.C. Maritime Employers Association (BCMEA), have now ratified the deal.
Canada port strike resumes as union members reject wage agreement
Excerpted from Reuters.com, By Nia Williams, July 19, 2023
Dock workers at ports along Canada’s Pacific coast rejected on Tuesday a tentative four-year wage deal agreed with their employers last week and returned to the picket line, the International Longshore and Warehouse Union (ILWU) said.
The ILWU represents about 7,500 dock workers, who walked off the job on July 1 after failing to reach a new work contract with the British Columbia Maritime Employers Association (BCMEA), which represents the companies involved.
In a statement on Tuesday afternoon, the ILWU said its members had voted down the recommended terms of settlement because they did not believe the terms would protect their jobs.
“With the record profits that the BCMEA’s member companies have earned over the last few years the employers have not addressed the cost of living issues that our workers have faced over the last couple of years as all workers have,” the ILWU said in its statement.
Minister of Labor Seamus O’Regan and Transport Minister Omar Alghabra said later in a joint statement the BCMEA had accepted the deal in full but ILWU Canada’s leadership decided not to recommend the ratification of the terms to their members.
The ministers said they were looking at all options and would comment further on Wednesday.
Vancouver Fraser Port Authority, the federal agency responsible for the shared stewardship of the Port of Vancouver, said it was disappointed that an agreement had not been reached.
The resumption of the strike could trigger more supply-chain disruptions and risk worsening inflation.
Federal government mediators helped negotiate the deal reached last week.
Pierre Poilievre, leader of the opposition Conservative Party, criticized O’Regan for failing to solve the dispute.
“He claimed he’d gotten a deal to end the strike. Now it’s back on with massive costs to consumers, workers and business,” Poilievre said on Twitter.
Strike at Canada’s Pacific Ports Ends with Tentative, Four-Year Deal
Excerpted from Reuters.com, By Chris Helgren, Updated 3 hours ago.
Vancouver, British Columbia, July 13 (Reuters) – Dock workers at ports along Canada’s Pacific coast and their employers accepted a tentative wage deal on Thursday, ending a 13-day strike that disrupted trade at the country’s busiest ports and risked worsening inflation.
“The British Columbia Maritime Employers Association (BCMEA) and International Longshore and Warehouse Union (ILWU) Canada are pleased to advise that the parties have reached a tentative agreement on a new 4-year deal,” the BCMEA said in a statement.
The ILWU also said there was an agreement, which must now be ratified by both sides.
Canadian West Coast ports strike is over, but it will take weeks for supply chain to recover
Excerpted from CNBC.COM, Jul 13, 2023, 2:45 PM EDT Updated Thu, Jul 13 20233:42 PM EDT,
By Lori Ann LaRocco @loriannlarocco.
Key Points
- Canada’s Labor Minister and Transport Minister announced on Twitter the end to the 13-day labor strike at the West Coast ports in Canada.
- The current West Coast ports strike has significant implications for both the Canadian and U.S. economy, and potential supply chain congestion from ocean cargo to inbound rails and sectors from chemicals to oil, lumber, and construction minerals.
- ILWU Canada union workers were expected to be back on the job for the 4:30 p.m. Pacific time shift on Thursday, but delays will plague the supply chain for weeks even with the strike over.
It’s over: Labor deal ends strike at Vancouver, Prince Rupert ports
Tentative labor agreement reached after federal mediator intervenes
Excerpted from FreightWaves.com, by Greg Miller, July 13, 2023.
After being shuttered for 13 days, the key container shipping ports of Vancouver and Prince Rupert in British Columbia, Canada, will open “as soon as possible” after a new labor deal was reached, the British Columbia Maritime Employers Association (BCMEA) announced Thursday.
The tentative agreement has a four-year term and is subject to ratification by both parties. No details were disclosed. The announcement of the end of the port labor impasse came after a federal mediator delivered recommendations to both sides with a tight deadline to respond.
Impact on US imports
The near-two-week strike led to a virtual shutdown of containerized rail moves from Vancouver and Prince Rupert to the U.S. Even though the British Columbia ports will reopen soon, the effect on the flow of U.S. imports via the Canadian gateways will linger. Canadian railway CN told FreightWaves that disruptions could take weeks or even months to correct.
Data from FreightWaves SONAR that tracks rail moves of loaded international containers from Vancouver and Prince Rupert shows a near-total collapse in volumes as a result of the strike.
That said, the two Canadian ports’ contribution to total U.S. imports is relatively small, so the strike’s effect on the U.S. was much less significant than on Canada.
Canada Nears Deal to End Port Strike, Labor Minister Says
Excerpted from Reuters.com, July 12, 2023, 5:34 AM
A bargaining agreement will soon be within reach to end a dispute between striking Canadian dock workers and their employers, Labor Minister Seamus O’Regan said on Tuesday.
About 7,500 port workers have been on strike since July 1 to press for higher wages, disrupting operations at the key ports of Vancouver and Prince Rupert, at a cost to trade estimated by an industry body to run into $377 million each day.
“As a result of the hard work by the parties at the bargaining table, there is a good deal within reach – one that would work for both the employer and the union,” O’Regan said in a statement posted on Twitter.
The talks between the British Columbia Maritime Employers Association (BCMEA) and Warehouse Union Canada (ILWU Canada) had resumed last week after a gap of four days, supported by federal mediators.
The differences between the employers and unions were not sufficient to justify continued stoppage of work, O’Regan said, adding that he had asked the senior federal mediator for a written recommendation of the settlement terms within 24 hours.
Upon receiving them, he will send them to the parties, with a deadline of 24 hours to decide on ratification, he added.
The ports play a crucial role in export of Canada’s natural resources and commodities, besides receiving shipments of raw materials.
The strike is disrupting trade worth C$500 million ($377 million) each day, industry body the Canadian Manufacturers & Exporters (CM&E) has said. Economists warn that could lead to supply-chain disruptions, fueling inflation.
The BOC Blast 472 7-11-2023 B.C port strike Day 10 Talks resume as economic cost from stoppage rises
B.C. port strike Day 10: Talks resume as economic cost from stoppage rises
By Aaron D’Andrea, excerpted from GlobalNews.ca.
Posted July 10, 2023, 11:45 am. Updated July 10, 2023, 9:34 pm
A port strike in British Columbia that is estimated to be costing the Canadian economy at least $500 million a day entered its 10th day Monday with no signs of ending soon.
Roughly 7,400 members of the International Longshore and Warehouse Union Canada (ILWU) employed at more than 30 ports in the province have been on strike since Canada Day.
Talks between the union and the British Columbia Maritime Employers Association (BCMEA) resumed on Saturday after breaking down earlier in the week. Ottawa and provincial governments had urged both sides to restart talks.
Canadian port strike talks resume, supported by federal mediators
Excerpted from Reuters.com July 9, 20238:44 PM EDT
Talks in Pacific Canada between striking dock workers and their employers have resumed after four days away from the negotiation table, a statement on Saturday by the British Columbia Maritime Employers Association (BCMEA) showed.
The BCMEA and the International Longshore and Warehouse Union Canada (ILWU Canada) met on Saturday, supported by federal mediators, the statement said. The talks had stalled on Tuesday and the two sides broke off negotiations.
Some 7,500 port workers went on strike on July 1 for higher wages, upending operations at the Port of Vancouver and Port of Prince Rupert – key gateways for exporting the country’s natural resources and commodities as well as for bringing in raw materials.
Canada’s federal and provincial governments had urged the parties to restart talks, while on Saturday Alberta Premier Danielle Smith in a statement said her province supports an immediate recall of parliament to consider legislation to resolve the work stoppage.
U.S. apparel trade group calls to recall Canadian Parliament as ports strike enters 10th day
Excerpted from CNBC.COM, Published Mon, Jul 10 20233:22 PM EDT Updated Mon, Jul 10 20235:06 PM EDT Lori Ann larocco@loriannlarocco
- A workers’ strike at West Coast Canadian ports enters its 10th day.
- It could take three to five days for every day the strike lasts for networks and supply chains to recover, according to an estimate from the Railway Association of Canada.
- Meanwhile, more vessels are diverting away from Canadian ports for American alternatives.
As a workers’ strike at West Coast Canadian ports enters its 10th day, trade associations both in the U.S. and Canada are warning the effect will inflate prices and cause weeks of delays in product arrivals.
ILWU in Western Canada on Strike; Said to Resume Talks Monday
West Coast port workers in Canada officially begin strike
EXCERPTED FROM CNBC.COM, PUBLISHED SAT, JUL 1 20234:39 PM EDT, BY ALEX HARRING/LORI ANN LAROCCO
KEY POINTS
- A union representing port workers in Western Canada officially began striking, an action that could have ripple effects reaching beyond the U.S.’s northern neighbor.
- More than 99% of members of the union, who support West Coast ports such as Vancouver and Prince Rupert, voted to approve the strike last month.
- Notice of the strike came Wednesday.
A union representing port workers in Western Canada officially began striking, an action that could have ripple effects reaching beyond the U.S.’s northern neighbor.
The International Longshore & Warehouse Union Canada’s Longshore Division announced its labor strike began in a Saturday Facebook post signed by union president Rob Ashton. More than 99% of members of the union, who support West Coast ports such as Vancouver and Prince Rupert, voted to approve the strike last month. Notice of the strike came Wednesday.
“The ILWU Canada Longshore Division has not taken this decision lightly, but for the future of our workforce we had to take this step,” Ashton said in the post. “We are still hopeful a settlement will be reached through FREE Collective Bargaining!”
The two parties are at odds over issues including automation, the use of contract work and the cost of living for workers. Two mediators appointed by the Canadian government oversaw discussions that ran through the end of May. Those discussions were followed by a so-called cooling-off period between the two groups.
A strike in the western ports occurring around holidays in both the U.S. and Canada could result in impacts on the American economy, industry followers say. The Port of Vancouver and Port of Prince Rupert are popular destinations for U.S. trade because these ports are among the major ports of call for goods arriving from Asia. Some logistics managers have told CNBC that rail service out of those ports is a lot faster than going through the port of Seattle or Tacoma.
The strike could lead to congestion in these ports with longshoremen unable to unload vessels. Congestion can turn into backlogs and lead to delayed pickups from terminals, which can then lead to late fees that are often passed on to consumers — a situation similar to what occurred during the pandemic.
Western Canada dock workers to resume talks Monday as strike enters third day
Excerpted from Reuters.com, by Chris Helgren, July 2, 202310:43 PM EDT
DELTA, British Columbia, July 2 (Reuters) – Dock workers at Canada’s western Pacific coast will resume talks on Monday to try and end their first strike in three decades, as a union leader urged on Sunday the federal government to stay out of the negotiations.
Some 7,500 dock workers representing the International Longshore and Warehouse Union (ILWU) went on strike Saturday after negotiations with the British Columbia Maritime Employers Association (BCMEA) failed to reach a settlement.
The strike threatens to disrupt work at two of Canada’s busiest ports, the Port of Vancouver and Port of Prince Rupert, the country’s No. 1 and No. 3 by turnover. They are the key gateways to export the country’s natural resources and commodities and bringing in raw materials.
More than C$800 million ($604 million) worth of goods make their way through the western ports each day, accounting for about a quarter of Canada’s total traded goods flow.
“The federal government must stay out of our business,” Rob Ashton, president of ILWU Canada, told reporters on Sunday. “If the BCMEA gets their way, and their way is to let the (federal) government make the collective agreement for them, there will never be labor peace on the waterfront,” he added.
After 33 consecutive hours of negotiations, the talks between the two parties “temporarily” paused on Sunday evening, and the talks would resume on Monday, the union said in a statement.
The walkout could have serious consequences for Canada’s economy and small businesses, the Canadian Federation of Independent Business said on Saturday. A prolonged strike would further fuel price pressures, just as the Bank of Canada has resumed its interest rate hike campaign to bring inflation back to its 2% range.
The union is seeking a deal to protect workers jobs and recognition for the sacrifices the staff made during the pandemic. Their main demands also include stopping outsourcing of work and to limit the impact of port automation on current and future generations of workers.