SHIPPING: Panama Canal increases drafts, to add another transit slot on 5 August

HOUSTON (ICIS)–The Panama Canal Authority (PCA) has increased the maximum allowable draft to transit the Neopanamax locks effective immediately, announced that another increase will take effect on 11 July, and will add an additional booking slot in the Neopanamax locks during Booking Period 2 for booking dates beginning 5 August.

Source: Panama Canal Authority

Water levels at Gatun Lake, the freshwater lake that feeds the canal’s locks have improved recently amid the arrival of the rainy season after a prolonged drought, allowing the PCA to continue to add transit slots.

Water levels at Gatun Lake, currently at 81.3 feet, are projected to be at 82.1 feet by mid-July and to 87 feet by December.

The transit restrictions that began in July 2023 – the first time in the canal’s history that limitations were placed on the number of daily transits – have gradually eased over the past few months and are approaching the average daily transits of 36-38/day seen prior to impacts from the drought.

The improved conditions at the canal are likely to improve transit times for vessels travelling between the US Gulf and Asia, as well as between Europe and west coast Latin America countries.

This should benefit chemical markets that move product between regions, including those in the following chart.

The bottleneck at the Panama Canal has had varying affects on US chemical markets.

Formosa Plastics USA had to shut down its EG2 unit because of negative impacts on monoethylene glycol (MEG) exports because of the backlog and delays transiting the canal.

The majority of product from the unit is expected to be exported to Asia.

The company restarted the unit this week.

Higher water levels at the Panama Canal could also have knock-down effects on US natural gas demand, ICIS feedstocks analyst Barin Wise said.

If higher water levels at the canal enable liquefied natural gas (LNG) shippers to cut down on travel times from the US Gulf Coast to Asia, it could encourage LNG export plant managers to maximize output, he said.

AUCTION PRICES EASE
The PCA said recently that auction prices have levelled off since the peak period last year.

In October-November 2023, there was a surge in auction prices related to a market-driven congestion premium, though this is no longer the case, the PCA said.

Auction prices are generally near normal levels presently, though auctions remain an invaluable tool and option for customers who may otherwise not have secured reservations.

The PCA noted that auction prices are also not set by the waterway, but rather influenced by many factors and market dynamics, including internal considerations such as waiting times and queue lengths, as well as external elements like charter rates and bunker prices.

Additionally, the specific preferences and needs of individual customers, which may not be fully captured by the route value model, can also influence auction outcomes.

WAIT TIMES FOR NON-BOOKED VESSELS
Wait times for non-booked southbound vessels ready for transit have been relatively steady at less than two days, according to the PCA vessel tracker and as shown below.

The tracker is only for non-booked vessels in the queue and shippers should consider two additional days as a minimum to estimate transit times for unscheduled vessels, the PCA said.

Focus article by Adam Yanelli

With additional reporting by Melissa Wheeler, Bryan Campbell and Emily Burleson

Thumbnail photo: Shows a container ship transiting the Panama Canal. (Source: Courtesy of PCA)