Panama Canal drought causes slot reductions

Panama Canal drought causes slot reductions and extended shipping delays

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Panama Canal drought causes slot reductions and extended shipping delays

As Panama Canal restrictions worsened, wait times for vessels without reservations increased during November. 

FreightWaves.com reports that in response to drought conditions, the Panama Canal Authority (ACP) cut the number of daily reservation slots from 32 at the beginning of November to 24 currently. Slots will drop to 22 on Friday, then to 18 by Feb. 1.

“If the number of daily containers continues to go down, I think container lines have to make a decision on which specific ship is chosen to pass because appointments to go through are not per company, they are per ship so that they can swap. For example, if MSC has a large refrigerated ship coming up, they can give that priority over service with dry goods,” Eric Holt, chief commercial officer of Holt Logistics Corp. tells FreshFruitPortal.com

Holt says that the only issue they have seen so far with canal restrictions was with Zim Lines who suffered a ship malfunction and missed their slot. This forced the company to wait a few days which can seriously affect the condition of produce. 

Shipments from South America

Holt Logistics is expecting the first shipment of Chilean cherries, blueberries, and grapes to come in right after Christmas, and Holt says exporters are concerned. 

“They have appointments, but they load whenever the fruit is ready, so I know they have reached out to Panama Canal authorities already to get preference because it is fruit products,” says Holt. 

January and February are the peak months for Chilean shipments, and Holt says it is yet to be determined if they will be able to insert more tonnage to keep up with the shipping supply. 

Holt thinks it won't be a huge issue for Chilean fruit, as their slots are reserved with time and with reliable container lines. However, the report from FreightWaves.com suggests that if enough ships don’t divert from the Panama Canal to offset the drop in reservation slots, the number of ships without reservations rises — as does wait time.

Pacific-to-Atlantic (northbound) transits showed a sharp rise in wait time in November for ships without reservations, coinciding with cuts to reservation slots. 

The average wait time was nine days on Wednesday, more than triple the average at the beginning of the month. The maximum wait time was 24.9 days on Wednesday, more than quadruple what it was in early November.

Alternative routes

Holt explains that traditional trading lines that come from Southeast Asia are putting more tonnage on services that arrive through the Suez Canal. 

“For refrigerated products, Cool Carriers is looking to go south around South America which adds around seven days more transit. This costs more in fuel, but they do save the canal charges so it's kind of a wash in terms of cost, it is however a week delay for the fruit,” he says. 

The cost per container will be higher than usual as all container lines are placing surcharges to go through the Panama Canal. 

Worst possible scenario

If the situation in the canal gets worse, there is a probability that all products will have to get off the ship on one side of the canal and go through the land bridge via truck. 

“That just adds costs, delays, and potential damages to the products, all things that are out of the ordinary. Every time you have to get products off a ship and reloaded there is port congestion and extra costs,” says Holt. 

Holt says the company has reached out to local senators and congress to alert them about the issues this situation could bring, therefore they ask that if they can advocate with canal authorities it would help. 

“Products will arrive at our ports and warehouses regardless if it's a week late, we will handle them in the quickest, most effective way possible," indicates Holt.

Supply issues in the U.S. market

This situation has forced both exporters and importers of produce to take action to maintain a steady supply in the U.S. market. 

“You can come into the U.S. through the West or East coast, and through the Panama Canal or the Suez depending on origin. So I do believe retailers will have to diversify their shipping patterns. Retailers will also need to carry more inventory than they traditionally do just in case of gaps, but I still haven't seen anything concrete,” says Holt.

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