Cash Market Moves

Due to ongoing drought and low water levels, ship traffic has been restricted through the Panama Canal, leaving a traffic jam of vessels waiting to move through its locks system. The Panama Canal Authority (ACP) said that as part of a worldwide phenomenon, in the last six months, the Canal experienced an "extended dry season" with high levels of evaporation. "The current drought severity, coupled with its recurrence, is historically unprecedented."

As of Aug. 29, the ACP said on its website that a total of 135 vessels are distributed between the Atlantic and Pacific entrances. "Of these, 53 have made reservations and will transit the Panama Canal without delay on their scheduled date. Vessels without reservations experience a wait of nine to 10 days, up from the usual five-day wait."

Mike Steenhoek, executive director of the Soy Transportation Coalition, told DTN, "There remains a draft restriction of 44 feet (from the normal of 50 feet) for the larger 'Neopanamax' locks that opened in 2016. The 'Panamax' locks still have the normal 39.5 feet of allowable draft. The Panama Canal normally has 40 transits per day. That has been reduced to 32 transits -- 10 for the Neopanamax locks and 22 for the Panamax locks. Dry bulk vessels, which soybeans and grain utilize, use Panamax locks. The restrictions on the number of transits are the culprit for the increasing queue we are witnessing at the canal."

According to figures from the ACP, Steenhoek said the total U.S. soybeans that transited the Panama Canal in 2022 were 15,203,455.54 long tons in 2022, or 567,595,672 bushels. The 2023 figure through Aug. 20 is 6,821,348.68 long tons reflecting not only the demand slowdown but also ongoing drought issues affecting the Canal.

Steenhoek said that as of Sept. 1, there were 124 vessels in the queue to transit the Panama Canal. "Of those, 60 vessels have a booked slot and 64 do not, which will result in a wait. Most of the vessels in the queue are 'Panamax' vessels (i.e., those that utilized the original locks opened in 1914). The Panama Canal Authority has a goal to keep the queue to 90 vessels or fewer, but they are obviously exceeding that.

"The Panama Canal Authority has announced the restrictions will continue for 10 months," Steenhoek said. "As these delays continue, it will compel shipping companies to increasingly utilize the Suez Canal route and/or the route south of the Cape of Good Hope."

On Aug. 31, there were various news reports that the ACP reportedly had held auctions for ships waiting to pass the canal. One vessel reportedly paid $2.4 million to transit.

AgriCensus noted that "The Authority kept only one to two daily slots for unbooked vessels that they auctioned to the highest bidder, according to a second-quarter earnings report from LPG company Avance Gas. This company said one bidder had paid $2.4 million for a one-way northbound transit at one auction on top of a regular toll fee of $400,000."

Steenhoek added, "Some of these exorbitant rates are due to a shipping company being contractually obligated to get to a location to load the vessel. If they don't get there as scheduled, there could be a significant fine or other penalty, so on certain occasions a company may be willing to pay a significant rate at auction just to get the ship where it needs to go."

According to Transport Topic, "The United States is the main source of canal traffic, with close to 72.1% of cargo passing through the canal either originating from or arriving at a U.S. port. That accounted for 215.9 million long tons in 2022. This traffic mainly came from East Coast and Gulf of Mexico ports."

Panama Canal weekly update including transits and current Gatun Lake water levels: https://pancanal.com/…

Daily vessel statistics in the Panama Canal: https://apps.pancanal.com/…

June 6, 2023, news release from the Panama Canal website on the preparations for the impact of climate events: https://pancanal.com/…

History and facts of the Panama Canal: https://www.britannica.com/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on X, formerly known as Twitter, @MaryCKenn

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