Topic of the week: The Panama Drought Continues
After months of ongoing drought conditions, the Panama Canal Authority (PCA) have released a statement advising new measures after “the driest month of October since 1950.” 73 years ago marked the driest October, and has now been surpassed as October 2023 saw 41% less rainfall than usual conditions meaning that water availability is reduced and Gatun Lake water levels are at an unprecedented low. Throughout the year the PCA has been implementing counter measures in order to preserve water levels as demand for transit has risen and a buildup of vessels generated.
On the 1st October the PCA announced modifications of the Fresh Water Surcharge in order to manage the maximum draft available to transit through the Panama Canal and to negate the effects of the drought and reserve as much water as possible. Changes were also made to the neopanamax locks in the form of water re-utilisation basins, as well as cross-filling in the Panamax locks. Following on from this the PCA have announced reservation slots from November through to February 2024 with a total of 49 slots available throughout November, 22 slots throughout December, 20 slots in January and finally 18 slots available as of February 1st 2024.
The PCA commented, “with less than two months left until the end of the rainy season, the Canal and the country face the challenge of the upcoming dry season with a minimum water reserve that must guarantee supply for more than 50% of the population and, at the same time, maintain the operations of the interoceanic waterway.”
Panama Canal operations have also been halted due to protests from Minera Panama against the government over an agreement to extract copper. These protests have caused blockades and therefore irregular operations through the canal. There have been more protests announced to be carried out.
The lower water levels are prompting carriers and vessels to use US West Coast ports in order to get cargo moving so expect to see an increase in demand.
Sea:
- Over the last two weeks China/East Asia to North America West Coast spot rates have risen by 1% from $1,548 /FEU to $1,563 /FEU according to Freightos data.
- China/East Asia to North America East Coast spot rates have slightly fallen over the last two weeks, decreasing by 0.2% to $2,212/FEU.
- Global container spot prices have declined over the last two weeks, and are now sitting at $1,094/FEU, a 1.9% decrease over the last two weeks, and a 67% decrease from spot rates this time in 2022 according to the Freightos Baltic Index (FBX)
- Current market conditions have meant that more ships will become part of the idle fleet if vessels are not redeployed or chartered out. As suspensions were announced on the Asia-North Europe and Asia-US East Coast loop services, it is unclear what alliance members, Hapag-Lloyd, ONE, Yang Ming and HMM will do with the surplus of vessels.
Air:
Global Air Freight spot rates currently sit at $2.61, as rates continue to fluctuate according to the Freightos Air Freight Index (FAX)
Europe to Northern America spot rates currently sit at $1.78 (100-3000kg), says FAX, increasing by 5%
Europe to Central Asia spot rates have decreased by 8.7% currently sitting at $2.29 (100-3000kg), says FAX
Europe to Asia, Greater China spot rates currently sit at $1.38 (100-3000kg), says FAX
The latest Xeneta figures have shown that air cargo demand saw a 2% increase over October from September, which is below the seasonal average from the past 5 years. There were hopes that air cargo demand would experience a peak season boost, but the data suggests that this may not be the case as only a marginal uplift was seen.
Hong Kong Air Cargo has now added its first Europe based service as it expands its fleet into Italy. The new service will operate between Hong Kong International Airport and Milan Malpensa, three times a week with the first flight having taken place on October 29th. This is the beginning of a new Europe initiative as the airline aims to add flights to Belgium and the Netherlands in the future.
That’s all for this week’s update…
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