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Thursday, June 20, 2024

Panama Canal Woes Mean Longer Haul for Many

Maritime Activity Reports, Inc.

December 13, 2023

Tanker Strinda inside the Gatun locks on the Panama canal. Copyright Moments by Patrick/AdobeStocks

Tanker Strinda inside the Gatun locks on the Panama canal. Copyright Moments by Patrick/AdobeStocks

As low water level continue to plaque the Panama Canal, shipowners and managers are paying the price in the form of longer hauls and higher fuel (and emissions) costs to deliver product to market.

In one example, oil tanker Cururo is taking the long way from Houston to Chile: sailing the length of South America's Atlantic coast, across the Strait of Magellan and heading up the Pacific coast before discharging.

The voyage could take 32 days and travel more than 10,000 nautical miles (18,520 km) versus about 23 days and less than 5,000 miles for a typical route through the Panama Canal.

The end to this monumental shift in trade and product flow has no end in sight, as low water is expected to plaque the canal zone well into 2024, meaning shipping companies, shippers and ultimately consumers ... will pay the price.

The change will mean less U.S. gasoline heading to the West Coast of South America, particularly Chile, said Matt Smith, an analyst at Kpler. Chile will instead likely pull gasoline from Asia, he added.

Cururo headed for the Panama Canal last month and, unable to secure a slot for passage, changed its route. Two other refined products vessels, Green Sky and High Loyalty, also have taken longer routes to or from Chile that avoid the Panama Canal.

U.S. diesel flows increasingly are heading to Europe as South America buys less due to Panama Canal logjams, Kpler data also showed. About 45% of U.S. diesel exports headed to Europe so far in December, compared with about 21% last month.

The redirection of refined product flows will also lead to higher shipping activity measured by tonne-miles and higher freight rates as U.S. tankers that typically go to South America now cross the Atlantic to Europe, or as ships from Asia travel to South America, analysts said.

Problems at the Panama Canal are impacting all shipping sectors, as discussed by Xeneta's Peter Sand in a recent interview with Maritime Reporter TV: