Focus: Historic drought, hot seas slow Panama Canal shipping

Evergreen Marine Taiwan

21/08/2023 11:00

By Lisa Baertlein and Marianna Parraga
       LOS ANGELES/HOUSTON, Aug 21 (Reuters) - Before the Ever
Max ship carrying lava lamps, sofas, Halloween costumes and
artificial Christmas trees could make its inaugural Panama Canal
voyage this month, a historic drought forced it to drop weight
by offloading hundreds of containers.
    Weather-related disruptions denied the vessel, owned by
Taiwanese shipping company Evergreen Marine, a chance on Aug. 1
to set a record for carrying the most containers through the
vital maritime shortcut that connects the Pacific and Atlantic
oceans.
    The Panama Canal Authority has reduced maximum ship weights
and daily ship crossings in a bid to conserve water. Maritime
transportation experts fear such events could become the new
normal as rainfall deficits in the world's fifth-wettest country
spotlight climate risks affecting the ocean shipping industry
that moves 80% of global trade.
    Ship owners have the options of carrying less cargo,
shifting to alternate routes that can add thousands of miles to
the trip or grappling with queues that earlier this month backed
up 160 vessels and delayed some ships by as much as 21 days. 
    The restrictions already are sending China-U.S. spot
shipping prices up as much as 36% amid soaring sea temperatures
that climate scientists warn could supercharge extreme weather. 
  
    "You have to wave a caution flag because the temperatures
are so far above normal," said Drew Lerner, founder and senior
agriculture meteorologist at World Weather, whose customers
include global commodity traders.
    Canal operators are on a tightrope as they work to manage
maritime trade disruption and prepare for what is shaping up to
be an even drier period next year, said Peter Sand, chief
analyst at air and ocean freight rate benchmarking platform
Xeneta.   
    More than 14,000 ships crossed the canal in 2022. Container
ships are the most common users of the Panama Canal and
transport more than 40% of consumer goods traded between
Northeast Asia and the U.S. East Coast. 
    U.S-bound vessels caught in the bottlenecks have carried 
Barbie dolls, auto parts, BYD solar panels, water treatment
equipment, diabetes testing kits and other goods, according to
data from Steve Ferreira, CEO of a company that audits ocean
shipping bills.
     Restrictions at the canal started earlier this year,
affecting about 170 countries and virtually every type of good -
including soybeans and liquefied natural gas from the United
States, copper and fresh cherries from Chile, and beef from
Brazil. 
    Bulk carriers that transport commodities from corn to iron
ore, as well as tankers that move oil, fuel, gas and chemicals
also are affected. Some energy companies are rerouting vessels
laden with coal and liquefied natural gas to the Suez Canal.
    
    WATER WATCH
    A naturally occurring El Nino climate pattern associated
with warmer-than-usual water in the central and eastern tropical
Pacific Ocean is contributing to Panama's drought. 
    The area around the canal is experiencing one of the two
driest years in the country's 143 years of keeping records, data
from the canal authority and the Smithsonian Tropical Research
Institute (STRI) showed. Rainfall measurements around the area
are 30-50% below normal. 
    Water levels in Gatun Lake, the rainfall-fed principal
reservoir that floats ships through the Panama Canal's lock
system, have remained below normal despite accumulation from the
current rainy season. 
    A potential early start to Panama's dry season and
hotter-than-average temperatures typical of major El Nino events
in the country could increase evaporation from Gatun Lake and
result in near-record low water levels by March or April 2024,
said STRI's Steven Paton.
    "It's the perfect storm of events," said Paton, who has
monitored rain patterns in the Central American country for more
than three decades.
    The frequency of major El Nino drying patterns has risen
significantly during the last 25 years of the canal's 109-year
history. If that continues, "it will be increasingly difficult
for (the Panama Canal) to guarantee that the largest ships are
going to be able to get through," Paton said. 
       
    BRACING FOR MORE CUTS
    Canal operators have lowered ship weight limits to
accommodate lower water depth - posing a problem for large
vessels like the Ever Max.
    The ship was built to carry more than 8,650 40-foot
(12-metre) cargo boxes. It arrived at the Pacific side of the
canal over the limit even though it was only carrying the
equivalent of 7,373 containers. 
    The vessel unloaded about 700 containers onto trains,
retrieved them on the Atlantic side and continued on to the U.S.
East Coast, according to the Canal Authority and Eikon vessel
tracking. Ship owner Evergreen Marine  2603.TW  declined
comment. 
    Canal operators also cut the number of daily ship crossings
to 32 from about 36 during normal operations since each passage
requires about 50 million gallons of water, only a portion of
which is recycled.
    Some shipping executives are bracing for more reductions
later this year, noting that in 2020 a less severe drought
prompted canal operators to reduce crossings to 27 per day.
    "Anyone shipping product around the world should be paying
attention to possible disruptions due to climate change," said
Brian Bourke, global chief commercial officer at SEKO Logistics.
 "The Panama Canal is just the latest example." 

 (Reporting by Lisa Baertlein in Los Angeles, Marianna Parraga
in Houston, Elida Moreno in Panama City and Louise Breusch
Rasmussen in Copenhagen, editing by Deepa Babington)
 ((lisa.baertlein@thomsonreuters.com))