Deputy Administrator Ilya Espino of the Panama Canal told Reuters that the canal does not anticipate the need for more vessel passage limits until at least April, when its authority would assess water levels at the conclusion of the dry season.

Due to an extreme drought in the previous year, the canal had to lower the daily vessel capacity. Rainfall in the final quarter of the year in December permitted the river to pause more restrictions that were scheduled to take effect in January.

The demand for transit through Panama has increased as a result of ship attacks in the Red Sea in recent months, which have forced many vessel owners to take longer routes to and from Asia, according to Espino.

“At least until April, we will maintain 24” authorized transits per day, she said in an interview late on Tuesday.

In the event that May brings the anticipated rains, the canal intends to gradually expand daily slots with the goal of reaching its typical number of roughly 36 vessels per day during the rainy season. Should the amount of rain fall fall short of the forecast, the authority may impose additional limitations on daily transit or draft, the greatest depth that a vessel can go.

“If rainfall does not begin in May, we would evaluate again whether to cut transit by one or two vessels per day, or to reduce maximum vessel draft to 43 feet,” she stated. During the dry season, the authority also keeps an eye on evaporation at water reservoirs.

At the moment, the canal can accommodate boats with a maximum draft of 44 feet. Because reducing that amount would compel many ships to reduce their loads and make the transportation of some products unprofitable, the Panama Canal Authority has refrained from doing so.

Priority passage through Panama is granted to container ships; but, starting last year, other categories—bulk carriers in particular—have been affected by the transit limitations.

According to Espino, the attacks in the Red Sea have made it more difficult for ships to navigate the world’s busiest waterway, the Suez Canal, because of the need to maintain water levels at the reservoirs that feed the canal.

“Due to problems at the Red Sea, many people forced to take alternative routes have tried to resort to Panama, but it has not been possible,” she said, adding bulk carriers have been hit hardest.

According to Espino, since 2022, there has been less need for LNG ships to transit via Panama due to the growing demand for American LNG in Europe; however, this could alter if American exporters are offered financial incentives to ship to Asia.

The Panama Canal Authority has projected that the transit limits will result in a reduction of up to $700 million in toll income for the current fiscal year, which ends in September. According to Espino, 1,500 vessels that would normally transit through the canal in 2024 may not pass through at all.

(Adapted from USNews.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Uncategorized