Shipowners look to avoid Panama Canal as wait times reach 21 days

Wait times at the Panama Canal have continued to mount, reaching up to 21 days as of Aug. 8, up from 18 on Aug. 4, causing clean tanker owners to avoid going through the canal, shifting their preference to book routes to the Atlantic Basin.

As the dry season has continued to wreak havoc on the water levels at Gatun Lake, canal wait times have increased sharply amid draft restrictions and a reduced number of transit allotments.

The most recent draft restrictions, announced June 22, put the maximum authorized draft for the Neopanamax locks at 44 feet and 39.5 feet for the Panamax locks. Under normal conditions, with no draft restrictions, the maximum draft authorized for the Neopanamax locks is up to 50 feet and up to 39.5 feet for the Panamax locks.

According to shipbroker and shipowner sources, wait times for ships looking to transit the Panama Canal northbound have hit 20-21 days, while southbound wait times have reached 18-21 days. Subsequently, shipowner preference has shifted to routes that avoid the Panama Canal altogether.

Multiple shipbrokers indicated that shipowners may be willing to take slight discounts on rates from the US Gulf to Brazil or Europe in order to avoid the canal.

"Owners right now are looking at the path of least resistance, so they'll prefer to go elsewhere," a shipowner said.

According to S&P Global Commodities at Sea data, the year-on-year increment between June and July US Gulf Coast clean petroleum products exports to West Coast South America has slowed by 82%. Exports in July 2023 totaled 2,298,999 mt, a 12% decrease from exports seen in July 2022.

Cancellation fees

As wait times increase and pre-booking slots for further out dates has become necessary to ensure passage through the canal, shipowners must also consider cancellation fees if their ships, for any number of reasons, are not able to make the dates booked.

"You can cancel the slot and they will give you money back depending on how many days in advance you [let them know]," a shipbroker said.

Another shipbroker said it would be necessary to cancel the booking at least 10 days in advance in order to avoid fees.

There is also an option to swap a booked ship with another, but that can also incur additional fees.

According to the canal authority, a ship that has been booked may be swapped under a number of conditions, including that both ships must be registered to the same operator and transiting in the same direction. Also, ships are allowed to swap their reserved transit slots up to five times per booking, and the swapping fee will be applied depending on the number of swaps the ship is involved in.

"We had a ship that we prebooked to transit on the 16th and she was late, but we had another ship that we could transfer that to, but it cost us a fee of $16,000," another shipowner said. "And that is on top of the prebooking fee at $40,000."

The average price of Platts assessments from S&P Global Commodity Insights on the USGC-Chile freight was averaged at $63.19/mt in July, while freight for the USGC-Brazil route averaged $51.20/mt. Platts is part of S&P Global Commodity Insights.

Platts assessed freight for the USGC-Chile route at $2.75 million Aug. 2, a high not seen since April 10.

Canal authority limits prebooking slots

The Panama Canal Authority said Aug. 4 that effective Aug. 8, Booking Condition 3 would be in effect for the Panamax Locks. Under Condition 3, the number of ships able to be prebooked to transit the Panamax locks was reduced to 14, with the condition remaining in effect until Aug. 21.

Previously the canal was sitting in Condition 1.a, which specified that 19 slots were open for prebooking.

Another shipbroker said it is going to "get worse before it gets better."