Panama Canal Temporarily Reduces Reservations to Address Growing Backlog

With reports of dramatic increases in the backlog waiting to transit the Panama Canal, the authorities informed shipping companies of a change in the reservation system for at least the next two weeks. The Panama Canal Authority continues to encourage shipping companies to enter into the lottery system to gain reservations, advice it issued after it announced it would reduce the total number of daily transits starting in August due to the drought in Panama.

“We informed our customers that effective August 8, a new Booking Condition, namely Condition 3, came into effect for the utilization of the Panamax locks,” the Panama Canal Authority confirmed today. “This adjustment, effective until August 21, 2023, has been introduced to alleviate congestion for ships already in queue to transit or in route, who were unable to secure reservations beforehand.”

The Panama Canal reduced the number of daily transits to approximately 32 for all ships with and without reservations. They noted that they would continue largely unchanged with 10 transits through the larger Neopanamax locks with the remainder at the older locks used especially by LNG carriers and bulkers. The draft restriction however also remains at 44 feet and is projected to stay there into 2024 meaning that the larger boxships are either forced to reduce their loads and transship containers by rail across the isthmus.

Since the restrictions were introduced, analysts have noted a rapid increase in the number of vessels waiting. Reuters is citing reports from officials at the canal authority saying that there are now up to 160 vessels waiting with analysts saying the wait has been up to three weeks. Global agency Waterfront Maritime Services had reported just a week ago that the number of reservations had jumped by 16 ships from 38 to 54 with reservations while 83 others were waiting for transit without reservations.

Under the temporary condition scheduled now in effect, booking slots are limited to 14 in total (comprising 10 slots for super-sized vessels and 4 slots for regular-sized vessels). The authority emphasized that those with existing reservations will not be impacted by these temporary measures, and it wants more ships to make reservations going forward.

Normally the canal provides 23 daily reservation slots for its operations. In periods of a substantial reduction in capacity, such as lane closures for maintenance, they noted the allocation is normally reduced to 16 daily booking slots. Despite current limitations and measures taken, the Panama Canal Authority highlights that demand remains high, hence the increased waiting times.

“We’ve had long lineups of ships before,” says Ricaurte Vasquez Morales, Panama Canal Administrator. He emphasizes that communication is critical as they take proactive measures to ensure its competitiveness and operational capacity for today and the future.

Analysts have said that some shippers are looking at alternatives to reduce their delays. S&P Global reported that some shippers were looking at splitting some loads on two smaller ships or the alternative of significantly longer routings to avoid the Panama Canal. The current draft restrictions are not impacting LNG carriers but concerns are if the canal were to further lower the levels it could impact this segment just as demand rises with the winter season in both Europe and Asia, which are both large gas importers.