The Panama Canal, a marvel of engineering connecting the Atlantic and Pacific Oceans, has long been a linchpin in global trade. Located in the heart of Central America, this vital waterway has facilitated the movement of goods between the Eastern and Western Hemispheres for over a century. However, recent developments have brought new logistics challenges to the forefront, impacting international freight forwarding and trade. In this article, we delve into the current situation at the Panama Canal, its historical significance, the impact of climate change, and how D.B. Group offers innovative solutions to overcome these challenges.
The Panama Canal: A Brief Overview
The Panama Canal, situated in the narrow Isthmus of Panama, is a 50-mile long waterway that enables ships to bypass the lengthy and treacherous trip around South America. Its strategic location makes it a critical conduit for global trade, particularly for goods traveling to and from the United States.
The Panama Canal plays a pivotal role in global trade, with a significant percentage of maritime traffic passing through its waters. According to The Economist's 2019 article, the canal's importance extends beyond logistics. Concerns about climate change and its potential impact on the canal have been raised, emphasizing the need for sustainable solutions.
As of the latest available data, the Panama Canal continues to facilitate over 12% of the world's total maritime trade, making it a vital gateway for the movement of goods between continents.
Logistics Challenges at the Panama Canal
Recent reports suggest a growing congestion issue at the Panama Canal. Ships, laden with goods, are experiencing delays, causing concerns for businesses and consumers alike. According to Shipping Italy, there is an increasing number of vessels awaiting transit. The Today Show even covered the traffic jam outside the canal.
The situation has been exacerbated by factors like droughts affecting water levels, as highlighted by AlixPartners and a 2019 article from The Economist titled "Climate Change Threatens the Panama Canal." This has led to restrictions on vessel drafts, reducing cargo capacity and causing delays in shipments.
However, ACP’s (Panama Canal Authority) available data doesn’t reflect a crisis as of now.
How does the Panama Canal work, and what is the current situation for container ships?
The Panama Canal works as a water elevator, in which vessels are lifted above sea level by a system of locks or lock chambers. Each set of locks consists of two lanes to guarantee a seamless shipping service in case maintenance is needed for one of them.
To move from one side to the other of the canal, ships must travel through 3 sets of locks that act as stairs. This process is done gradually. After accessing the first lock chamber, the gates close and the sluice is opened to let water flow from the higher chamber to the lowest one. After some minutes, the water level in the two locks evens up, and the ship moves to the level of the second block.
The ship then moves to the next chamber, and the gates close behind it. The same process continues until the vessel goes through all the locks and reaches the Gatun or Agua Clara locks. There, the vessel is lifted up to 85 feet (26 meters) above sea level and then lowered back to 0 feet.
Water used to move ships up or down flows by gravity. This is why rainfall is essential to keeping the canal operational, and drought can become a real problem.
Size limits for vessels traveling through the canal are determined by lock chambers (or locks), water depth in the canal, and infrastructure clearance. The ACP defines size limits and requirements for vessels traveling through the Panama Canal using two terms:
- Panamax, indicating the ships that are allowed to travel through the original locks (up to 5,000 TEUS)
- Neopanamax (or New Panamax), including all ships matching requirements that became effective after 2016, the year in which the new, larger locks were inaugurated (up to 12,000 TEUS).
On average, 50 million gallons of water are consumed for every ship that uses the Panamax locks. While NeoPanamax locks were built including a system of recycling pools that reduces the water consumption by 60% (Panama Canal Authority).
According to FreightWaves, ACP’s intention is to lower the average transit through the canal from 36 to 32 per day. How?
- decreasing the daily no. of transits through the original Panamax locks from 26 to 22.
- keeping the daily no. of transits through the Neopanamax locks unchanged at 10.
As container ships serving the U.S. market generally use the Neopanamax locks, at this point the effects of such a reduction in daily traffic are still not visible. On the contrary, the number of Neopanamax vessels transiting through the Canal in July 2023 is higher compared to July 2022 and July 2021, while the total number of ships transiting is in line with the average referring to the same month in the past two years.
Plus, while average waiting time seems to be higher for July and August, it also seems not to be concerning container ships, based on ACP reports.
D.B. Group: Innovative Solutions
In the face of these logistical challenges, we at D.B. Group leverage our expertise, offering tailored solutions to ensure the smooth movement of goods through the Panama Canal and beyond.
Our commitment to providing the best service to our customers ensures that shipments can reach any destination nationwide in the US and overseas through innovative solutions. As we navigate the ever-evolving landscape of international logistics, D.B. Group teams are observing the situation to be able to react quickly and effectively to any change.
Remember, for all your international freight forwarding needs D.B. Group has you covered.