Home Business News Panama Canal crisis eases, but is Christmas cancelled already?

Panama Canal crisis eases, but is Christmas cancelled already?

by LLB staff reporter
12th Sep 23 11:16 am

It may only be early September, but the ultimate impact of the Panama Canal crisis is likely to be a more expensive, more restricted Christmas, warns the international delivery specialist ParcelHero.

It’s only 15 weeks until the big day, and many manufacturers and retailers are already gearing up for their peak season.

ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., says: ‘The Panama Canal is the main route for goods to America’s East Coast from Asia and it carries 40% of all US container traffic. Those containers will be full of products, from clothes to phones to toys. And what impacts America will also impact the UK this Christmas. There are signs the Panama Canal crisis is easing, but it could be too little, too late.

‘The Panama Canal is suffering its worst drought in 70 years. However, following a reported peak backlog of 200 vessels and waiting periods of up to 21 days, there is some hope the tide is changing. Our latest information, for 10.00 (Panama time), 11 September, is that there are now 119 vessels waiting in queue. Just one ship has been queued for two weeks and the average wait for vessels that haven’t booked ahead is 4.8 days northbound and six days southbound.

‘That’s certainly an improvement but before we run away with the idea that using the canal is now plain sailing, it’s important to remember that many restrictions remain in place. The huge “neo-panamax” vessels, which use the massive new locks opened in 2016, have had their maximum draft levels reduced from 50ft to 44ft. That means they are severely restricted in the amount they can carry. And there is still a strict reduction in the number of ships able to use the locks, down from 36 to 32 transits a day.

‘The result is that many shipping lines are simply cancelling services, rather than lose money on partially loaded vessels stuck in a log-jam. Inevitably, the knock-on effect is that shipping companies are charging increased rates for those shipments that do actually take place. It also means some shipping companies are using the notorious and lengthy alternative route around Cape Horn, which takes more time and further increases costs.

‘How might this impact on Christmas here in the UK? Many of those delayed containers will be full of electronic goodies from US brands that are actually made in China (think iPhones) or are manufactured in the US but use microchips made in Asia. That means supply chains are being stretched at just the wrong time of the year. The result could be shortages of goods and increased prices as retailers fight over available stocks. There will be a significant impact on a range of products, including TVs, cell-phones, exercise bikes, PCs, Christmas sweaters and tree lights.

‘As well as US-China products eventually destined for UK markets, there is also a more immediate impact on Britain. Goods from the US West Coast to the UK (and the rest of Europe) will be directly affected. The delays are also bad news for UK manufacturers and retailers exporting their products to destinations such as California, as these products must also use the canal.

‘The Panama Canal is also used to move petroleum, grains and petro-chemicals to the US. That means everything from energy to food to manufacturing prices could be impacted in their run-up to Christmas.

‘Is there any sign that the crisis will be over before we reach Christmas peak? I’m afraid the short answer is no. It requires 200 million litres of water to flow down tiered locks into the sea to allow the passage of a single vessel along the Panama Canal. This water is largely generated from Lake Gatun, in the centre of the waterway, which has dried up severely because of the prolonged dry season.

‘Lake Gatun is now at 79.7ft (24.2 metres), compared to its usual 87.41ft (26.6 metres) in September of previous years. We are now nearing the end of Panama’s rainy season. By November, Lake Gatun should be topped up to 89ft (27.1 metres). Clearly, this is not going to happen. As a result, the canal authorities are planning continued restrictions for the rest of this year… and throughout 2024.

‘One small piece of good news is that the problems are unlikely to significantly impact courier and express parcel deliveries to and from the UK and the US West Coast now or over Christmas. These are usually air freighted, bypassing the Panama problem.

‘However, budget, low-urgency “surface mail” (as freight companies term mail transported by land and sea) may be affected by the ongoing restrictions. We advise everyone sending items to the US to regularly check ParcelHero’s USA page, which gives full details on any changes in prices, Customs advice, and details about sending food, prohibited items, etc.

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