Panama Canal levels up

Nearly two years have passed since the Panama Canal Authority cut the number of vessels transiting the waterway. It was a difficult decision, but one that had to be made to ensure water supplies for the country’s people were unaffected after El Niño and little or no rainfall seriously depleted levels in Gatun Lake, which the Canal relies for its operations. As a result of those restrictions, transits dropped by 36% as operators sought alternative methods to move their cargo.

The recent announcement that the Rio Indio Reservoir Project will receive the resources it needs to shore up Panama’s water supply is a cause for celebration. At a cost of up to $1.6 billion, it should help the Canal’s long-term sustainability, reliability and competitiveness whilst also ensuring that vital supplies to the local population are not at risk. But until its completion, scheduled for 2030, we have to use the Panama Canal as it is today in a way that secures a sustainable future.

Opportunity
By March this year, water levels in Gatun Lake were about 87 feet – well above the five-year monthly average, enabling the Canal to boost its transit options with more booking slots as capacity returns to normal.

Right now, in stark contrast to the situation in late 2023 when demand exceeded supply, some transit slots are unused.

Since the start of 2024, an average of three booking slots per day have not been taken advantage of – and that represents a great opportunity for vessels to secure them without having to go through the auction process.

This represents a major shift. Where once auctions were often the only way to get a slot with operators bidding against each other, they now have greater access to transit slots under both Period 1 (90 days prior to transit) and Period 2 (14 days prior to transit) reservation systems, and that enables them to plan earlier and cost-effectively.

The right transit, at the right price
GAC’s team in Panama witnessed first-hand the impact of Canal restrictions on our customers and we have been working tirelessly over the past two years to restore confidence.

We have done so by making sure they are advised of all the options – including the transit slots that are not being used – to book the right transit for them, at the best possible price.

There are several ways to book transits, depending on the type and size of your vessel, the urgency of its voyage and what slots are available:

• Regular Booking – Ships are scheduled on a first-come, first-served basis. While this is the most cost-effective option, with no extra booking fees required, vessels can face long waits, especially during peak season.
• Transit Reservation System – Vessels can book their transit slots up to a year in advance. While this guarantees a transit date, it comes with additional fees on top of Canal tolls. Slots are limited.
• Auctioned Slots – During periods of high demand, vessels can bid for available slots. Whilst ideal for urgent or time-sensitive shipments, the price can be high with no guarantee of securing a slot.
• Special Arrangements – For passenger vessels. Again, with higher fees.

In one instance, we secured a Period 2 booking for a dry bulk carrier sailing from Japan to Balboa at the basic booking fee, without competition and with a comfortable two-day arrival window. Even though the ship arrived slightly earlier than expected, the flexibility built into the booking window enabled it to make its passage without any delay.

In another case, a break bulk vessel booked 90 days in advance under Period 1, three days after its ETA. Concerned about the time gap, we helped the operator understand the benefits of the Transit Reservation System and they booked a slot for two days. By working with us, they made significant savings in day hire costs and secured fuel flexibility for their next port call.

Understanding what option works best for your ship, voyage and cargo is crucial to navigating the Panama Canal. Whether you need to keep your vessel running on schedule, have an urgent passage or are conscious of budgets and fuel use, owners and operators can take advantage of the flexibility and opportunities available now the waterway is fully operational once again.

I recently hosted a webinar in which we outlined the opportunities – especially for the dry bulk trade heading from Asia to the West. You can check it out here.

It’s personal
GAC’s highly experienced team in Panama are all personally invested, both in the future of the Canal and in efforts to preserve the country’s water supplies. After all, we are local, so we are all potentially directly affected by shortages.

That’s why we have a strong commitment to voluntary environmental actions to help the land preserve water, such as our ongoing tree-planting project.

Revisit
It’s a great time to revisit and refine your Panama Canal transit strategies.

Early engagement can make all the difference whether it is for short-term voyages or longer-term fleet movements. We can help you understand what works best for you and secure the best transit windows for your vessels. Just contact us at [email protected]!