Container Ships Shrug Off Perils of Panama Canal Restrictions

Glenn Taylor
·4 min read

Although the Panama Canal saw continued declines in the number of vessels traversing the gateway throughout 2023 amid historically low water levels, container ships are maintaining a steady pace as other sectors reroute—a great sign for apparel and footwear brands concerned about delays for product shipped out on the ocean.

According to data from the Panama Canal Authority (ACP), container ships have mostly avoided the long queues and expensive transit auctions at the Panama Canal, largely because they have initial booking priority ahead of other vessel types like chemical tankers, liquefied petroleum gas (LPG) carriers and dry bulk carriers that transport grains and coal.

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For retailers, this means cargo is less likely to experience multiple day slowdowns, especially if shippers reserve a spot more than 30 days in advance.

Container ships’ share of total monthly transits increased to 30.6 percent in December, according to the ACP, up nearly 5 percentage points from October. The figure represents a major jump from its typical share—in the ACP’s two previous fiscal years, container ships represented 19.8 percent of traffic.

“The situation is obviously very fluid and further draft restrictions could be announced at any time,” said Simon Heaney, senior manager, container research at Drewry in a blog post. “But it seems that for container ships at least, the Panama Canal bottleneck is proving much less restrictive than it might otherwise have been.”

Luckily for container ships, total shipping costs for cargo transiting the canal aren’t expected to escalate, according to a recent analysis from McKinsey & Co. While cargo costs are forecast to jump 14 percent for dry bulk vessels and 12 percent for vehicle carriers, container ships should see a less than 1 percent increase, the consulting firm said.

With only 24 total vessels allowed to transit the waterway daily, container vessels are still enduring challenges. In particular, the vessel class saw per day transits drop to an average of 7.4 in both November and December, down from 8.4 in October.

According to Heaney, “There were sufficient operational delays to prompt THE Alliance [including ocean carriers Hapag-Lloyd, HMM, Ocean Network Express and Yang Ming] to announce a switch to the Suez Canal on three Asia-to-U.S. East Coast services (this was before the Suez diversions).”

But even with the added delays, per-day transit totals for container ships are still not far off from container ships’ average daily transits of 7.7 in 2022 and 7.6 in 2023, Heaney pointed out.

The daily average of total arrivals has declined every month since September, starting with 31.63 vessels per day and ending at 23.7 vessels per day in December.

In December, the ACP reversed an earlier decision that would have cut daily transits further in 2024. Rather than dropping from 22 to 20 transit slots in January and 18 in February as initially laid out, the ACP instead increased the number of transits to 24 per day. However, the number remains a far cry from the typical 36 daily transits seen before restrictions were imposed last year.

ACP’s data for December 2023 shows that for all ships, monthly transits across both locks were down by about 25 percent compared to two months prior, to 746 transits versus 1,002. In December 2022, there were 1,281 transits—a 42 percent year-over-year decline.

In total, the ACP projects that there could be 3,964 fewer transits through the Panama Canal in 2024, as well as 998 more transits expected through the Strait of Magellan around the southern tip of South America.

Currently, larger vessels transiting Panama’s Neopanamax locks are allowed maximum drafts of up to 44 feet (a 50-foot max in normal conditions), with seven slots available per day. Smaller vessels sailing through the Panamax locks have are capped off at 39.5 feet, with 17 allowed to be booked on a daily basis.

Heaney pointed out one of the barriers to the draft restrictions—fewer cargo can gets transported across the canal.

“It is estimated that containerships lose approximately 350 20-foot equivalent unit (TEU) capacity for every foot of lost draft,” Heaney said. “For the biggest containerships able to sail through the Neopanamax locks this could reduce the payload by around 2,000 TEUs.”

The ACP began implementing daily traffic and draft restrictions starting last summer amid a months-long drought that depleted water levels at the manmade lake that feeds the canal’s lock system.

Water levels at Lake Gatun were 81.3 feet Tuesday, down nearly six feet from the five-year January average of 86.9 feet.