Panama Canal: Current Status on Transit Restrictions and Water Levels

Ilya Espino, Deputy Administrator of the Panama Canal Authority, told Reuters that the Panama Canal does not foresee further vessel transit restrictions at least through April. The Canal Authority will assess water levels following the dry season and will monitor water conditions before making any decisions. Severe drought in the final quarter of last year forced authorities to impose transit caps, but subsequent rainfall enabled further restrictions to be delayed until January.

Espino noted that recent attacks on vessels transiting through the Red Sea have increased shipping carriers' demand for passage through Panama as they seek alternative routes for Asia trade lanes. However, despite growing demand, the obligation to maintain reservoir water levels has prevented the canal from accommodating the redirected traffic. According to Espino, while many seeking alternative routes due to Red Sea disruptions have turned to Panama, this has not been feasible.

Espino stated that 24 authorized daily transits will continue through April, but with increased rainfall expected in May, this number could rise to approximately 36 vessels per day. However, if rainfall does not begin in May, the authority will consider reducing daily transit numbers by one or two vessels or lowering the maximum vessel draft to 43 feet. The Canal Authority is hesitant about cutting the maximum draft of vessels (44 feet) as this would require ships to reduce their cargo loads.

Additionally, evaporation rates in water reservoirs are being monitored during the dry season. Espino noted that despite increased U.S. liquefied natural gas (LNG) demand in Europe, the number of LNG vessels transiting through Panama has declined since 2022. However, this situation could change if Asian shipments become economically more attractive for U.S. exporters.

The Panama Canal Authority is forecasting approximately $700 million in lost transit fee revenue in the current fiscal year due to transit restrictions. Espino added that the canal could miss a total of 1,500 vessels expected to pass under normal conditions. Earlier this week, the U.S. Federal Maritime Commission (FMC) held an informal public hearing to investigate the impacts of attacks on commercial vessels in the Red Sea and Gulf of Aden.

Key Points

• The Panama Canal does not foresee further transit restrictions at least through April.

• Attacks in the Red Sea have increased demand for passage through Panama.

• The obligation to maintain water levels has prevented the canal from accommodating additional traffic.

• 24 authorized daily transits will continue through April, potentially rising to 36 in May with rainfall.

• A significant decline in transit fee revenue is projected for the Panama Canal.

• There is a decline in the number of U.S. LNG vessels, though the situation could change.

News Link: https://www.porttechnology.org/news/panama-canal-delays-transit-restrictions-until-spring/