Source: The Loadstar, Date: 19th June 2023
Shippers are being warned against a hasty return to the US west coast after an apparent breakthrough in contract disputes and while there are concerns over an “unprecedented” drought in the Panama Canal.
Reports over the past week have suggested the El Niño weather system will result in historic lows along the famous canal bringing stricter draught restrictions and threats of a complete halt to container shipping transits.
Shipping advisor of the Kemmsies group told The Loadstar: “Draught restrictions were imposed in March after rains failed to materialise.
“A strong rainy season is essential to fill the lakes that supply the canal, most important of which is the 100-year-old Gatun manmade lake which has seen new developments generate compete for the water it uses to feed the locks.”
Professor of UCL told The Loadstar El Niño was a “complicated” system to measure. He explained: “One possibility is that El Niño pushes water across the Pacific from east to west, and if this happens it may reduce the water level in the Panama Canal.”
Canal draught adjustments are usually announced three weeks before implementation, but the Professor of UCL said the warnings have come at an unfortunate time for shippers. News of the possible lows coincided with last week’s announcement of a breakthrough in a contract dispute at ports on the US west coast.
The Professor of UCL said while that may come as a salve for carriers facing up to El Niño woes, they, and shippers, must be cautious on their western return.
“We’ve been asked by shippers if they should reroute their cargo through the west coast ports, but the ILWU is a different union beast to the east coast’s ILA,” Professor of UCL noted. “Everyone needs to remember the agreement is in place, not the contract, and until that is the case it would be risky to reroute, even amid El Niño concerns.”
Despite calls for restraint, the Professor of UCL said the assumption had to be that water levels would continue to drop in the Gatun lake.
The container lines using the canal may be concerned, but they were ‘keeping their powder dry’ when it came to explaining how they might reduce potential problems from El Niño.
There is guidance from the canal authority and we need to adapt our intake on relevant services. The low water levels are a clear example of the effects of climate change on rainfall and weather patterns across the globe, which causes a ripple effect through the supply chain. It is very clear that now in a climate crisis, there is a demand for strong regulatory frameworks for all shipping actors.
How shippers could mitigate the twin difficulties of labour unrest and worsening climactic conditions? There is an alternative – data suggested the Texas gateway had been one of the beneficiaries of cargo movements away from the west coast.
Houston has seen a real surge in volume, proving its reliability and it has rail to connect it to other US destinations. It has reliable, strong intermodal container capacity, with interchanges in St Louis, Memphis and Chicago to link up the rest of the country. It’s reliable but it takes longer and is more expensive.
The shipping consultant told The Loadstar carriers were beginning to refuse heavy boxes for the Panama Canal loops and taking them on their Suez Canal services instead. This could mean that they will add more Suez links at the expense of Panama if the drought continues.