Panama Canal Transit Restrictions & Israel-Hamas Conflict: Impact on Shipping

In October of 2023, the Panama Canal area experienced its driest month in 73 years, significantly affecting water levels. As a result, the Panama Canal Authority (ACP) has introduced measures to conserve water and maintain operations.

Here’s a brief overview:

Transit Capacity Restrictions: Due to water conservation efforts, the ACP has reduced daily transit reservation slots. Starting in November, slots will be limited to 25 and further reductions are planned in the coming months (please view the plan below)

Effects on Container Shipping: Larger container ships traveling from Asia to U.S. East and Gulf Coast ports are already impacted by the drought. They require more draft than the current limit of 44 feet, resulting in reduced cargo capacity.

Container Service Schedule Adjustments: Expect changes in container service schedules as restrictions come into effect. Seasonal fluctuations in cargo flows will also play a role.

Impacts on LNG and LPG Shipping: Non-containerized ships, such as Very Large Gas Carriers (VLGCs) and LNG carriers, may face challenges due to size limitations in the Neopanamax locks. Rerouting via longer routes is likely.

Market Response: VLGC freight futures have seen a significant increase in response to the restrictions, with rates surging.

Israel-Hamas Conflict: Shipping Impact

The Israel-Hamas conflict has shipping experts evaluating its potential effects:

Container/Dry Bulk Shipping: Less direct impact.

Suez Canal/Strait of Hormuz: Possible longer routes, affecting rates.

Crude Oil Shipping: U.S. crackdown on Iran may boost tanker rates.

LPG Shipping (VLGCs): Higher oil prices may increase demand.

Refined Products Shipping: Elevated rates due to low inventories.

LNG Shipping: Trend towards diversification and new import facilities.

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Noatum Logistics Solutions

Noatum is offering transload/dray options in LA/LGB for shipments to USEC to bypass the Panama Canal. For more information on this service, please contact your local Noatum service representative or click here.

The longer-term implications of these measures on global maritime commerce remain to be seen, but it’s clear that the Panama Canal’s current water challenges are reverberating across the shipping industry.

Noatum Logistics will continue to monitor and update moving forward.

If you have any questions, please contact your local Noatum Logistics representative.