Kanal: What would happen if the water situation worsens?

The Panama Canal plans to maintain 24 daily transits at least until April, its manager Ricaurte Vásquez told EFE.

Vásquez stated that the channel “does not predict any rain”, as the official dry season started on December 2nd, which is why, he expressed, “we made our forecast assuming no rain until the end of April”.

However, he assured that with the amount of water the road currently has available, “24 ships are expected to pass through every day to be able to meet the demand.”

Considering whether it can be given deterioration of the water situation, “If the rains don’t arrive in May, that could require a change in draft or a change in the number of transits, which could be reduced from 24 to 22 or 20, if that’s the case.”

“Our forecast through April is basically that we have enough water and we’re managing the way we’re managing to be able to sustain 24 daily transits.”

They predict less income

The channel predicts a Drop in revenue from tolls by 800 million dollars due to restrictions on the transit of ships due to the severe drought resulting from the El Niño phenomenon, which affects the operation of the interoceanic belt, the only one in the world that uses fresh water.

In fiscal year 2024, “toll revenues were $100 million below each of the first three months of operations (October, November and December).

“If (this) continues like this, and let’s assume we normalize by June, there would be a loss of approximately 800 million” dollars, indicated the manager of the Administration Channel Panama (ACP).

However, Vásquez pointed out that “Part of this drop in tolls was compensated by the canal with revenues from other maritime services, including auctions,” which are carried out in order to obtain space or quotas for the transit of ships through waterways.

With the auctions, “we recoup roughly between $200 million and $300 million in that same period of loss that we have in tolls,” he added.

But he clarified that “the problem with the auction is that it will depend on how many ships want to go through Panama, because there will be some redistribution of the fleet to avoid the risk of transiting through Panama and not being able to find a place.”

Waiting times at the crossing have been normalized
Vásquez explained that for this reason it is already seen that “the queue today is 54 vessels, (when) we are transiting 24”, which, he said, “means that we are waiting for two days of transit, which is more or less the norm.”

“The fact that the auction has so far compensated for that is because of how sudden the adjustments have been, but having already given three months a certain level of certainty that we can manage this, the shipping companies will be able to make their bookings well in advance, so that no ship is sent to wait here and then the auction prices may not be as high as those expressed in the international media,” he indicated.

The restriction of daily transits, which currently amounts to 24, while the normal number is 36, has since August of last year led to multi-week stoppages of ships in which up to 160 ships were waiting, mostly without reservations, i.e. without a scheduled crossing.

Some shippers have decided to use other routes due to the difficulty of crossing the canal, or to transfer cargo in Panamanian ports and via the train that connects the Pacific and Atlantic coasts.

The restrictions did not affect the channel’s revenue in 2023, which brought a new historic contribution of $2,544.59 million to the treasury.

The Panama Canal, which under normal conditions moves 500 to 510 million tons of cargo each year, is a relevant route for global trade that connects 189 sea routes and 1,920 ports in the world, according to its administration.