Jan. 11, 2024
PANAMA – On Nov. 1, the New York Times took an expansive look at the growing problem of drought, specifically as it effects the Panama Canal, the iconic feat of engineering that connects shipping routes between the Pacific and Atlantic oceans.
“A drought has left the canal without enough water, which is used to raise and lower ships, forcing officials to slash the number of vessels they allow through,” writes N.Y. Times reporter Peter Eavis. “That has created expensive headaches for shipping companies and raised difficult questions about water use in Panama.”
Eavis explains that container ships, which transport finished consumer goods, typically reserve passage well in advance, and have not yet faced long delays. However, ships carrying bulk commodities generally don’t book passage in advance.
A Dec. 4 article in Fortune Magazine documents the continuing problem, noting that shipping companies are trying to pass along the extra costs to their customers. “Hapag-Lloyd AG, Mediterranean Shipping Co. and Maersk all have announced new Panama-related surcharges in recent months,” writes Fortune’s Ruth Liao. “Economist Inga Fechner of ING Research said the effect on commodity and consumer prices has been muted by sluggish global demand. But the higher shipping costs will have a trickle-down effect in the long run, ultimately hitting consumers.”
Nikolay Pargov, chief revenue officer for container shipping platform Transporeon, also comments in Fortune: “Container ship operators are already booking alternative routes to avoid the canal for 2024. The rigid routes of container ships – which for some shipping companies have thousands of customers to consider for each vessel – make it more difficult to re-route them at the last minute.”
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