The ongoing drought and much slower shipping transit times through the Panama Canal, as the country faces the driest rainy season and October in 73 years, is being closely watched with 82% of the over 354.6 million boxes of bananas exported yearly from Ecuador passing through this interoceanic waterway.
Picture: Panama Canal Authority
According to Jose Antonio Hidalgo, executive director of the Association of Ecuadorian Banana Exporters (AEBE): “82% of the Ecuadorian banana cargo shipped necessarily uses the Panama Canal. Specifically what is destined for the coastal market of the eastern United States of America, Europe, Mediterranean and Russia, except Vladivostok. 12% goes to the West Coast of the United States of America, East Asia (China, Japan, South Korea), Vladivostok, South America. Of the total that cross the Panama Canal, 80% do so in container ships and 20% in specialized ships that had trouble crossing the Channel.”
The Panama Canal authority in their latest advisory (of 8 November, 2023) to shipping owners and fleet managers warned with 41% less rainfall than usual this winter and the upcoming summer months, the next couple of months will see much less vessels passing through. There is also the challenge of balancing fresh water use for the Canal between what is needed for half of the population of Panama (total Panama population 4.44 million). “…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.”
Hidalgo says the container ships that have seen the most delays in Panama have been specifically the Neo Panamax Post Panamax, ”due to their high draft, which were built in the last five years with the aim of saving days of navigation and reducing fuel use in a scenario of high oil prices. This has not been the case for the majority of reefer vessels which have had no problems crossing the Channel to date."
He says Ecuador's banana industry is watching the weekly movements of ships through the canal very closely. “Most reefer contracts are biannual. Additionally, the freight reduction on reefers has been smaller compared to non-contract dry bulk cargo. For Ecuador it sells in the FOB modality, therefore, the freight value is competition of the importer. The situation in the Panama Canal is directly affected by a climate issue, so the logistics situation must be analysed week by week to avoid a lack or excess of supply in the destination markets,” concludes Hidalgo.