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More than 200 ships are stranded on both sides of the Panama Canal after authorities limited the number of crossings due to a severe drought.
The large ships, supposed to carry millions of dollars worth of goods, are locked in a traffic jam and some wait weeks to cross.
Ship tracking data highlights the scale of the problem with hundreds of ships, mostly bulk or gas carriers, waiting near the canal entrances on the Pacific and Atlantic oceans.
The number of daily transits through the canal has been capped at 32 by the water authorities in a bid to conserve water.
Panama is expected to lose $200 million in revenue from the delays and it could lead to skyrocketing prices for groceries and packages in the United States as additional charges are added to shipping costs.
Ship tracking data highlights the scale of the problem with hundreds of ships, mostly bulk or gas carriers, seen waiting near channel entrances on the Pacific and Atlantic oceans
More than 200 ships are stranded on both sides of the Panama Canal after authorities limited crossings due to severe drought
Entrances to both sides of the Panama Canal are blocked with some ships stuck for more than 20 days.
Some shipowners have resorted to re-routing their voyages to avoid the backlog.
The canal uses three times as much water daily as New York City and needs rain to replace it.
But the rainy season has not yet arrived in Panama and the canal is going through its driest period for more than a century.
Restrictions on the number of passing ships have been extended until September 2.
“The delays change from day to day. Once you’ve made the decision to leave, there’s no point in backtracking or deviating, so you can get stuck,’ said Tim Hansen, commercial director of Dorian LPG, which operates major gas carriers. The Wall Street Journal.
Without enough rain, ship transits are cut off and the lucky ones who cross pay hefty bounty.
This increases transportation costs for cargo owners like US oil as well as Asian gas importers and exporters.
Ricaurte Vásquez Morales, the administrator of the Panama Canal, warned that the restrictions may have to remain in place until the rest of the year.
He said the drought could lead to a $200 million drop in revenue next year if low rainfall continues into winter.
Conditions of extreme rain or drought are much more regular than in the first years of operation of the canal, according to him.
It’s a huge challenge for the Panama Canal Authority, which supplies water to about half of the country’s 4.5 million people.
“The channel communicates with its customers so that the information allows them to make the best decisions even if it means that they can temporarily choose another route,” Vásquez Morales said.
“Demand remains high, proving that the Panama Canal remains competitive in most segments, even with water-saving measures.”
Operators hired the US Army Corps of Engineers, which originally built the canal, and set aside $2 billion over the next decade to divert four rivers into the waterway and help ships cross.
The canal already has three rivers feeding it.
There were no significant disruptions to container ships which are the biggest users of the channel.
Most enjoy preferential status as they work fixed hours and book crossings up to a year in advance.
The big ships, supposed to carry millions of dollars worth of goods, are stuck in a traffic jam and some are waiting for weeks to cross
Entrances to both sides of the Panama Canal are blocked with ships stranded for more than 20 days
However, some are caught in the chaos and have to pay several times the average toll.
Lars Oestergaard Nielsen, customer delivery manager for the Americas at shipping line AP Moller-Maersk, said: “We had two ships that couldn’t book and it was quite expensive.”
“We went to an auction and paid $900,000 on top of the normal toll fee of $400,000 for each ship to pass through.”
Usually ships cross the canal at an average draft of 50 feet, but this has now been reduced to 44 feet to cope with drought conditions.
Larger boxships must cross with fewer containers in order to match the lower water depth. Smaller ships are added to help move the rest of the cargo.
Those not on fixed routes like bulk carriers and gas carriers that are reserved for transporting short-term cargo end up facing the longest delays.
Oslo-based Avance Gas operated 17 vessels and had to reroute 75% of its vessels carrying US butane and propane exports.
Ships transporting these products to Asia pass through the Suez Canal or around the Cape of Good Hope.
“Waiting time is one thing, but it is also uncertainty,” said its managing director Øystein Kalleklev.
The number of daily transits through the canal has been capped at 32 by water authorities in a bid to conserve water
Panama is expected to lose $200 million in revenue from the delays and it could lead to soaring prices for groceries and packages in the United States as additional fees are increased for shipping costs.
“It is risky to repair a ship without a firm itinerary because you can lose the contract if the wait is too long.
The Panama Canal is a big mess these days twenty days in a queue is unprecedented at this time of year.
Huge ships carrying bulky items like coal and iron ore are stuck in traffic jams. They are usually owned by medium or small operators and are not prioritized.
The restrictions could add more pressure on the prices of consumer goods, shipping companies and experts say, as delays and extra fees increase shipping costs.
This could lead to higher prices and less choice for American consumers.
The Panama Canal is important for transporting consumer goods from Asia to the United States, especially before peak seasons like Christmas.
It also allows faster transportation of American goods to Asia and the Pacific coast of South America.
The Panama Canal holds 40% of the market for containers transported from Northeast Asia to the US East Coast.