With the Red Sea crisis paralysing the global shipping industry, there is more trouble for the sector due to the severe shortage of water in the Panama Canal. Danish shipping major Maersk will bypass the Panama Canal and instead use the rail service to cross the canal. Other shipping lines may follow.

The artificial 82-kilometre waterway connects the Atlantic Ocean with the Pacific Ocean. As of Friday, a total of 47 ships are waiting in the queue to cross the Panama Canal. The waiting time for northbound ships has doubled to 10 days in the past month, according to information on the Internet.

Following the attack by Yemen-backed Houthi militants in December on container ships, the Red Sea is being passed and ships diverted via the Cape of Good Hope in the southern tip of Africa.

Bypassing the Panama Canal is adding fuel to the fire, said an official of a large garment exporter.

The Canal locks at each end lift ships up to Gatun Lake, an artificial freshwater lake 26 m above sea level created by damming up the Chagres River and Lake Alajuela to reduce the amount of excavation work required for the canal, and then lower the ships at the other end. An average of 200,000,000 litres of fresh water are used in a single passing of a ship.

Maersk said based on current and projected water levels in Gatun Lake, the Panama Canal Authority has needed to make reductions to the amount and weight of vessels that can pass through the canal. “While we continue to work closely with the ACP, moderating and aligning our operations to fit the changes, we have made changes to services to ensure that our customers are impacted as minimally as possible,” the Danish shipping major said.

A land bridge

Maersk said it is amending its OC1 service, operating between Oceania and the Americas. The vessels that used the Panama Canal before will now omit the Panama Canal and use a “land bridge” that uses rail to transport cargo across the 80 km of Panama to the other side.

This creates two separate loops, one Atlantic and one Pacific. Pacific vessels will turn at Balboa, Panama, dropping off cargo heading for Latin America and North America and picking up cargo heading for Australia and New Zealand. Atlantic vessels will turn at Manzanillo, Panama, dropping off cargo heading for Australia and New Zealand and picking up cargo heading for Latin and North America, the line said.

The Panama Canal cuts across the Isthmus of Panama and is a key conduit for international maritime trade. It has been a major thoroughfare for international trade for over 100 years, connecting nearly 2,000 ports in 170 countries. The top origin and destination countries are the US, China, and Japan. In 2022, over 14,000 transits were completed through the canal by ships carrying more than 291 million long tonnes of cargo, according to the World Economic Forum.

Since the start of 2023, traffic through the canal has slowed down due to a prolonged drought that has diminished the amount of available water used to fill the canal locks, which require 101,000 cubic metres of water to fill. The water is drawn from the nearby lakes.

The waiting time for ships arriving at the Panama Canal has increased from a matter of hours to several weeks. Several shipping companies have reportedly implemented surcharges for clients moving goods through the canal.

Red Sea crisis

Quoting a customer in Singapore, Germany’s Container xChange platform said that due to the Red Sea crisis, the average rate on China-Europe quoted this week was about $5,400 for a 40-foot container as against $1,500 a week before. Latin America (East and West), Japan, Korea, Europe, and the Mediterranean witnessed the highest increase in container trading spot rates over the last 30 days, the agency said.

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