Panama Canal Works to Maintain Reliability Amid Drought Crisis

    The canal, which under normal conditions moves 500 to 510 million tons of cargo each year, anticipates a decrease in toll revenues of US$800 million this year

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    The Panama Canal is working to maintain its reliability and competitiveness by providing prior information to its clients in the midst of the severe drought that has forced it to restrict the daily passage of ships through the canal to 24, out of an optimal of 36. the only one with fresh water in the world, its administrator, Ricaurte Vásquez, said in an interview.

    The main routes served by the Panama Canal are the East Coast of the United States-Asia; US East Coast-West Coast of South America, and Europe-West Coast of South America. All types of cargo pass through, from container ships, the star segment of the business, to refrigerated vessels with fruit, including bulk carriers, gas carriers and vehicle carriers.

    The canal, which under normal conditions moves 500 to 510 million tons of cargo each year, anticipates this year a decrease in toll revenues of 800 million dollars, which will be partially offset by between 200 to 300 million dollars. that other maritime services will provide, including the auction system that allows ships without transit reservations to obtain a quota, according to Vásquez’s figures.

    Reliability and competitiveness in times of crisis

    The gradual reduction of transits starting in mid-2023 and of the draft, currently 44 feet out of a maximum of 50 feet, has triggered alarms in Panama and fears that the canal, 80 kilometers long and uniting the oceans Pacific and Atlantic, is losing reliability and competitiveness.

    For several weeks starting last August, an agglomeration of vessels was recorded, generally bulk carriers transporting coal or iron ore and some gas carriers, which are handled without transit reserves due to the nature of their business. Container ships, the canal’s main client, have avoided the crisis because they can save their quota up to a year in advance. The traffic jam stopped. Now there are around fifty ships in line, which “is more or less the norm,” said Vásquez.

    He acknowledges that there has been “some reallocation of the fleet to avoid the risk of transiting through Panama and not being able to find a space” to pass through, but he emphasizes that prior information is the great ally of shipping companies and the route to overcome this crisis.

    The channel strives to inform its customers in advance of any changes in the transit system so that they can “make their adjustments.” It is about providing reliability, through a process in which all users have been listened to, at least the first 20 most important.

    Work has been done to break down the details related to the last 36,000 transits through the canal to strengthen its competitiveness compared to other routes, and “the lessons learned from the use of water” have been identified, he added.

    “To the extent that we have a relatively normal rainfall pattern” the situation will be solved in the short term, but “it would help a lot to have a place (in addition to the two artificial lakes that feed the canal and are depleted by the drought) where we can store more water for when the next Niño comes. And that is the issue,” said Vásquez. The canal has already identified projects to guarantee water, but their completion depends on decisions of the Panamanian Government.

    Neither Suez nor the Mayan Train

    Vásquez, a doctor in managerial economics and former Minister of Planning, downplayed other land cargo transportation projects in the region or the effects of the situation in Suez, which saw ship traffic reduced by 30% in January as a result of the crisis. in the Red Sea.

    As for Suez, the ships that pass through that canal are larger and do not fit through the Panamanian locks. The only way to “capture a piece of that business” would be for “the conflict situation to extend for 9, 10, 12 months (…) and for it to start to rain here (in Panama).” In any case, “it is much simpler for a ship the size of those that pass through Suez to go around the Cape of Good Hope” than through Panama, he noted.

    Regarding the Mayan Train, Vásquez maintained that “multiple cargo handling is the most inefficient thing in the world,” and that “there is no method of transportation more efficient than maritime transportation, maritime from origin to destination.”

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