Panama Canal risks losing more customers 

Photo of author

By LatAm Reports Editorial Team

The ACP administrator, Ricaurte Vásquez, said it is crucial that between the next 12 to 18 months a clear message is sent to the shipping companies and customers that Panama has a solution to the water crisis.

The water crisis is not only a problem of the Canal, but of the whole country, said the administrator of the Panama Canal Authority (ACP), Ricaurte Vásquez, in an interview with Panama in Directo.

He argued that it is urgent that the country send a clear message to the shipping companies and the maritime sector that allows us to transmit with certainty that Panama does have a solution for the water crisis and that it will carry out the plans in the short, medium and long term.

Otherwise, there is a risk that customers will continue to be lost and that shipping companies and the maritime industry will choose to buy larger boats to adapt to new longer routes to take to destination markets, not to pass through the Canal.

Panama Canal risks losing more customers

Ricaurte Vásquez, administrator of the Panama Canal. Isaac Ortega.

He admits that the drought situation affects the competitiveness of the Canal. Vásquez explained that the value of the route is key for some shipping companies and customers and the sample is the case of a boat that paid up to $4 million to get a quota.

Are there some customers who can pay a higher price because the value of the route is important, and others who do not have the possibility because the product they carry. Then there are some goods that can’t afford it and can opt for a longer route, Vásquez explained.

He reported that at the end of April he will meet with customers in the bulk ship segment who are some of the most affected by the restriction of daily transits. Currently, the Canal allows the passage of 27 boats per day, when in normal times without drought restriction, transits range from 36 to 38 daily.

The ACP administrator explained that for the Canal changes in maritime routes and the situation of customers will be determined both by the global trend of reducing carbon emissions in maritime transport and by the decision of the shipping companies to opt for larger boats and ordering the construction of these ships to even think about the changes of routes and not passing through the Canal.

“If the market finds that because we don’t have water, the [Channel] route is not reliable, they’re going to have a longer shot and to do so they’re going to have to buy more boats to move the same amount of merchandise, that’s the critical signal we’re seeing,” the administrator said in an interview with Panama live.

If we in the next 12 to 18 months do not give an unequivocal signal that we are going to face the issue of water availability or at least indicate that there is a program to be implemented, the decision left to the customer is to build more ships and forget about the Canal route, warned the administrator of the ACP.

He also said that once a customer makes that decision to use another route very difficult to reverse.

Panama Canal risks losing more customers

Currently, the Canal allows 27 transits a day. EFE

He admitted that the proposal of several countries such as Mexico, Colombia and even Nicaragua to build dry canals pose a threat, but in the long term.

Earlier what we are seeing is the signal that the industry can give of investing large amounts of money to organize a larger fleet to go through Cape Esperanza because the Suez route is less politically reliable and is a recurring theme that has not been resolved. On the other hand, with the issue of the channel, the solution is ours, it is a decision that the country has to make individually,” he said, insisting that it is necessary to decide on a new reservoir.

In an attempt to explain the water situation, the ACP administrator has given several talks in the regions, such as in the case of David, Chiriquí and others provincial indicating what happens with water.

Panamanians have no awareness of the problem we have with water. The issue goes beyond whether it is water for the Canal, there are a lot of Panamanians who have no water and it is a task of the State and the Government, he reiterated this Wednesday, April 3.

Alternative routes take longer

In February, the Mckinsey & Company consultancy said drought constraints in the Channel were changing maritime routes in the region by impacting the supply chain from Asia to the United States and vice versa, with the aggravating limitations on the red sea and geopolitical issues in Europe and the Middle East.

A ship, for example, traveling from Asia to the Caribbean that would normally cross east through the Panama Canal, might prefer to go west around Cape Good Hope in the far south of Africa. In this scenario, which would take 26 days to pass through the Channel, it would go to 39 days around Africa.

Another route would be that a ship traveling from the west coast of South America to the Caribbean, which would normally pass through the Panama Canal, could cross through the Strait of Magellan, in the far south of South America. This journey would last 31 days, compared to 6 days on the route through the Panama Canal.

And the other scenario is of ships traveling from the west coast of North America to the Mediterranean Sea, which would normally cross east across the Panama Canal, could instead head west through the Suez Canal. It would take up to 40 days (without considering the recent problems in the Red Sea), while on the Channel it would be only 21 days.

This article has been translated from the original which first appeared in Prensa