Water levels in the Panama Canal have been a notable concern for the container shipping industry for what feels like all of 2023. The typical dry season in April and May brought harrowingly low water levels that had not been seen since about 2019, triggering fears of significant weight restrictions to container ships.

In fact, the only thing that prevented a wider impact during that time was the low demand for the ocean shipping market. As the main route for vessels transiting from China to the U.S. East and Gulf ports, most vessels departing at that time were well short of full capacity and had room to bear weight. Had this scenario played out in 2021 when ships were completely full, the impact would have been significant.

Eventually, rain fell and the water levels stabilized, and it seemed the potential crisis had passed. However, while water levels did rise, they are still well below average and not increasing to the same degree as they would in a normal year. In fact, the current Gatun Lake water level being just below 80 ft, is roughly five feet below the normal August average.

This prolonged timeframe of lower-than-average water levels has caused the now widely reported backlog of nearly 200 vessels at anchor, waiting for their turn to transit through the important waterway. The drone videos themselves create stunning visuals of the situation.

However, the effect on the container shipping industry is a bit harder to pin down. While the backlog does include containerships, most vessels having issues are bulk and commodity-based vessels that sit lower in the water. Containerships, except for the largest ones, also use a different set of locks where there is less demand, allowing them to move through at a higher rate.

As such, there has been no significant change to transit times on containerships crossing the canal thus far, and steamship lines themselves have continued to provide announcements claiming little expectation of considerable delays.

For container shippers, the main concern continues to be the looming possibility of weight restrictions. As we are in the peak season of container shipping, vessels are closer to full capacity. This raises the possibility that some carriers, or at least specific voyages, will need to reject heavy cargo or a certain number of containers, even when the vessels are not full.

Even as peak season potentially subsides heading towards Q4 2023, blank sailings that steamship lines institute could force more containers onto fewer ships, something which would have a similar effect to peak season demand. In short, the threat will remain as long as water levels stay low, even if demand returns to March and April lows.

There is good news in the short term, though. Recent projections show that by late September, the water level is expected to rise and by the end of October, should be two feet higher than the current level. This upward projection should provide some relief, especially if it continues into the early winter months.

However, the relief may only be temporary. The current “El Nino” weather pattern causing much of the disruption, has the possibility to be worse in 2024 than it has been this year. Therefore, while no immediate changes to containerized supply chains need to be enacted, the Panama Canal should remain on the planner’s radar as we move into the new year.

By Chris Lindstrand, Director of International Transportation

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