As an important channel for global shipping, the Panama Canal has been suffering from drought and water unprecedented since records began in 1950. According to CNBC, affected by this, there are long queues on both sides of the channel, and more than 150 ships have been waiting for passage, and the waiting time for navigation has reached 21 days.

Panama, a golden waterway connecting the Pacific and Atlantic oceans, is as famous as the Suez Canal and plays a vital role in world trade and economic development, with about 6% of global maritime trade (mainly from the United States, China and Japan) depending on the waterway. The United States is the largest user of the Panama Canal, with the total volume of merchandise exported and imported containers accounting for about 73 percent of Panama Canal traffic. China is the second largest user of the Panama Canal, accounting for 21.4% of the canal's freight volume in fiscal 2022.

As an important channel for global shipping, the Panama Canal has been suffering from drought and water unprecedented since records began in 1950. According to CNBC, affected by this, there are long queues on both sides of the channel, and more than 150 ships have been waiting for passage, and the waiting time for navigation has reached 21 days.

Panama, a golden waterway connecting the Pacific and Atlantic oceans, is as famous as the Suez Canal and plays a vital role in world trade and economic development, with about 6% of global maritime trade (mainly from the United States, China and Japan) depending on the waterway. The United States is the largest user of the Panama Canal, with the total volume of merchandise exported and imported containers accounting for about 73 percent of Panama Canal traffic. China is the second largest user of the Panama Canal, accounting for 21.4% of the canal's freight volume in fiscal 2022.

In fiscal year 2022 (October 1, 2021 to September 30, 2022), more than 14,000 vessels passed through the Panama Canal, carrying 518 million tons of cargo.

In terms of operation and management, the Panama Canal, with a total length of more than 80 kilometres, is a lock type canal, and ships need to use locks to raise or lower the water level when passing. However, due to low rainfall this year, resulting in water shortages, the water supply for the canal's Gatun and Alajuela Lagoon serious decline in water levels, and therefore restricted the passage of vessels.

In response, the Panama Canal Authority has repeatedly adjusted draft limits for large ships. The most recent change came in July, when the Panama Canal Authority required no more than 32 ships to pass each day and no more than 44 feet of draft depth. Previously, the Panama Canal averaged 35-36 vessels per day. According to the Maritime Services Network, the relevant staff of the Panama Canal Authority said that the canal traffic restrictions will continue until September next year.

In order to compete for 32 passes per day, the shipping companies have come up with various methods. The canal authority also proposed that shipowners could reserve lock slots, which led to the formation of a model of "auction" slots.

40% reduction in traffic, increase in Sea Freight rate

From February 15 this year, ships passing through the Panama Canal will also be charged a "freshwater fee" of $10,000 if they are longer than 125 feet. At the same time, the Panama Canal Authority will also charge a variable fee of 1% -10%, depending on the water level of Gatun Lake in Panama at the time of transit. The International Chamber of Shipping (ICS) expects the move to increase the cost of ships passing through the Canal de Banamas by up to 15%.

Under the pressure of a variety of new costs, the rise in freight rates has become inevitable. At present, container shipping lines such as MAERSK, CMA CGM and Hapag-Lloyd have added surcharges ranging from $300 to $500.

As a result of restrictions and increased costs, some merchant ships chose to unload part of their cargo at the entrance of the canal, ship it overland for export, and then reload it.

At the same time, the above situation will also directly affect global trade. The Global Times quoted an international transport expert as saying that the weight restrictions in the Panama Canal are expected to result in a 40% reduction in the capacity of ships going to and from the Panama Canal.

According to public information, the Panama Canal mainly transport goods for grain, minerals, machinery and equipment, metal products, chemicals and liquefied petroleum gas, of which about 26% of the transport business each year involving liquefied petroleum gas, liquified natural gas and other bulk commodities. Increased transportation costs may also lead to higher prices for these goods.

The Panama Canal Authority told the media in March this year that the number of ships passing through the Panama Canal is expected to decrease significantly in fiscal year 2023, and the total traffic is expected to be difficult to reach 500 million tons. Combined with current and future impacts, the Panama Canal's total throughput in fiscal year 2023 will be further reduced.