Posted on August 16, 2023
The drought-stricken Panama Canal is limiting the number of big ships that can travel through the key trade passage, and that has port leaders in Charleston and other East Coast gateways monitoring the impact on cargo shipments.
The Central American country’s second-driest year in nearly a century has led canal officials to limit the number of daily crossings to 32 ships, with a maximum draft — or depth — of 44 feet. The lack of rainfall has water levels at Lake Gatun, which feeds the waterway, at a four-year low.
That has caused container lines to cut back on the number of cargo boxes they carry and, in some cases, raise their prices. The average cost of sending a 40-foot container through the canal from China to the U.S. Gulf Coast has increased by 36 percent since June, according to a report by the Financial Times.
The fallout on volumes along the East and Gulf coasts has been minimal to date, but it could become a long-term headache. More than 140 ships were waiting to traverse the canal as of Aug. 13, according Marine Traffic, a vessel-tracking website.
Of the 26 weekly container services that call on the Port of Charleston, seven use the canal to make their way to the Wando Welch Terminal in Mount Pleasant while an eighth alternates between the Panama Canal and the Suez Canal, which cuts through Egypt.
The State Ports Authority said the backlog and tighter restrictions, which will be in place through the rest of this year, could delay some ship arrivals or alter future routes.
“This could cause some service schedule slides or more cargo routed through the Suez Canal,” a spokeswoman said.
Cargo moving through the Panama waterway accounts for just 3 percent of global trade but 40 percent of all U.S. container traffic. While volumes have leveled off since the pandemic and canal restrictions are not yet a major concern, some shippers are bracing for delays.
“Customers haven’t seen the delays they are going to be seeing,” Joe Monaghan, CEO of Worldwide Logistics Group, told the Journal of Commerce. “We’re expecting very soon people are going to start saying ‘where’s my freight?’”
One potential bright spot is the lower number of containers making their way to the U.S. now compared to the import surge during the pandemic. Shipments of inbound goods are expected to reach their highest levels in nearly a year this month but are still trailing pandemic-era shipments double-digit percentages, according to the National Retail Federation.
Ben Hackett of Hackett Associates said decreases in cargo volumes this year have come even though consumer spending and U.S. employment have increased.
“The discrepancy between rising growth in sales and declining cargo volumes is happening because retailers are working their way through inventory built up over the last 12 to 18 months,” Hackett said in a written statement. “Cargo growth should resume as inventories are depleted.”
