The Panama Canal will start reducing the number of daily transits allowed through the waterway next month as it endures lower-than-normal water levels and prepares for a severe El Niño climate event.
Starting Sept. 4, 34 vessels will be allowed to pass through the corridor, down from the current 36. A second round of cuts will commence on Sept. 15, further reducing the daily transit number to 32 ships.
The canal averaged about 32.5 transits a day in June and roughly 34 transits a day in July, according to the Panama Canal Authority (ACP).
“Current watershed conditions continue to warrant additional preventive measures to support the long-term sustainability of Canal operations,” said the ACP in a notice to shipowners and shipping agents Thursday.
The ACP has been taking steps to mitigate the potential adverse effects of the El Niño climate phenomenon, which is likely to be one of the most powerful on record and persist into Panama’s dry season of January to April.
El Niño is characterized by warmer-than-usual water surface temperatures in the eastern and central tropical Pacific Ocean, with those conditions leading to a months-long drought throughout 2023 and early 2024. Over a 10-month span, the canal reduced capacity from the normal 36 vessels allowed through to as low as 22 ships per day.
The authority cautioned that weather conditions are “changing more rapidly than originally anticipated.”
From May to August, cumulative rainfall across the canal’s watershed has been 34 percent below the historical average, while watershed inflows have been 44 percent lower.
Amid concerns of a further reduction in precipitation and runoff, the canal operator has already imposed multiple draft restrictions for larger Neopanamax vessels to limit the amount of freight carried through the channel. The most recent restriction was implemented Aug. 15, when depth was narrowed to 48.5 feet.
With transit caps coming into effect, the ACP is postponing another planned reduction of the maximum authorized depth for Neopanamax ships from Aug. 26 to Sept. 2. That cut will take the draft to 48 feet. The subsequent reduction to 47.5 feet, originally scheduled for Sept. 3, will instead take effect on Oct. 1.
The authority warned that the reduction in transits may increase waiting times for vessels arriving at the waterway without a secured reservation.
The shipping logjam at the canal continues to pile up, with the new restraints compounding prior traffic increases stemming from the disruptions in the Strait of Hormuz. As of Friday, 124 vessels are waiting to transit the waterway, with 88 of them having booked a space ahead of time. That figure has jumped from Monday, when 115 ships were waiting to pass through.
Average wait times for non-booked vessels are hovering around eight days, with ACP data indicating that northbound queues sit at 8.5 days, while southbound backlogs could last 7.7 days.
The ACP says it also could temporarily suspend all or part of the transit reservation system when necessary. Booking through this system is the only mechanism that guarantees a transit date for vessels.
Companies without a booking can pay more to cross the Panama Canal through an auction that awards slots to the highest bidder. One such vessel reportedly paid as much as $4 million earlier this month to skip the line and pass through the canal.
As it implements the new restrictions, the ACP is also changing how some auction slots are allocated, grouping vessels into four categories from Sept. 3: LNG and LPG ships; dry bulk, general cargo and other vessels; containers, vehicle carriers and refrigerated vessels; and chemical, crude and product tankers.
These changes are designed to make the auction process more accurately represent the mix of cargo moving through the canal while making more efficient use of available water.
For Neopanamax vessels, the canal will also give priority to full container ships with the highest capacity of 20-foot equivalent units (TEUs).
As the canal prepares to endure the shifting weather patterns, two of the ports adjacent to the waterway have remained central to a growing rift between Panama and terminal operator CK Hutchison.
Hutchison said Thursday it was seeking more than $1.5 billion in damages from the country after its seizure of the Balboa and Cristóbal ports, referring to Panama’s decisions as a “state attack campaign” on the firm’s assets.
The Hong Kong-based company’s local subsidiary, Panama Ports Company (PPC), had operated both the ports until Panama’s Supreme Court ruled that their 25-year concession to run the two ports was unconstitutional.
That court ruling followed an attempted sale of the ports to a consortium involving Mediterranean Shipping Company (MSC) and U.S. hedge fund BlackRock for $22.8 billion. The proposed transaction underscored wider geopolitical tensions between the U.S. and China, with President Donald Trump making previous threats to “take back” the canal under American ownership and President Xi Jinping reportedly angered that the deal was set to take place.
PPC had separately sought at least $2 billion in compensation from Panama over its takeover of the ports, which it said was unlawful under international arbitration proceedings.
Hutchison said its new proceedings were focused on breaches of treaty obligations and international law, which are distinct from PPC’s contract rights being pursued in its own arbitration case.