Christmas supplies heading to Britain could be delayed over the coming weeks in a threat to the festival season as the Panama Canal suffers its worst-ever drought. Unprecedented conditions have seen water levels in the vital 50-mile shipping route connecting the Atlantic and Pacific oceans fall to their lowest since the mid-1900s.
Dozens of massive container ships carrying presents and festive items including Apple’s new iPhones, TVs, exercise bikes, clothes and tree lights are experiencing delays of up to four weeks – and the crisis could yet last for several months. Congestion in the canal could have a wider impact across the global supply chain – with experts warning that Christmas in the UK and Europe could be impacted. The cost of food and energy prices could also rise because grains and fuels are among other major supplies transported through the canal now experiencing delays.
Experts have warned that the disruptions at the canal are likely to remain in place for ‘some time to come’, with some fearing the restrictions could continue into 2025. Nearly 80 ships aiming to pass through the canal have been met with significant delays. Instead of the eight to ten hours it typically takes to transit through, ships are now waiting one to two weeks in line. Some companies have paid as much as $4million (£3million) to move to the front of the queue and bypass wait times, Fox News reported. This is compared to an average auction price of about $173,000 (£137,000) just one year ago.
Economist Inga Fechner of ING Research told Bloomberg : ‘It’s getting more costly, and looking for alternative routes will increase costs and maybe also weigh on prices in the end.’ The average wait time in the queue has risen from 4.3 days on November 7 to 11.7 this month, Panama Canal Authority data revealed. Before the vital shipping route experienced delays, some 38 ships passed through each day. A total of more than 14,000 ships crossed the canal in 2022. But with limited water to maintain the freshwater lock system, only 24 ships have been able to cross through each day since November 7, reported the Daily Mirror. Ships are being forced to take huge detours, some even up to a month, through the Suez Canal in Egypt. It is understood that the number of ships passing through will fall further to 18 a day from February because of the drought.
The delays for shipping containers could make goods, including iPhones, sent from the US west coast to Britain harder to get hold of. David Jinks, head of consumer research at ParcelHero, said: ‘How might the Panama crisis affect Christmas here in the UK? ‘Forty per cent of container traffic to the US uses the canal. ‘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 typically carried on the canal in containers, including TVs, mobile phones, exercise bikes, PCs, Christmas sweaters and tree lights.’ Mr Jinks previously warned that the crisis could affect electronic components coming from China to the US, which may be going into products that eventually come to the UK.
Many slots are open to book at a fixed price well in advance but a small number are held back for last-minute operations which are sold to the highest bidder. Companies have the option to pay millions of dollars to jump ahead in the queue if a ship with a booked reservation leaves. James Allen, vice president of liquefied natural gas chartering and operations at Cheniere Energy, said: ‘I sleep better at night knowing that I am going around the cape or Suez and not waiting in line, especially when it starts to be really desperate and you pay $4 million.’ And Steve Gordon, the managing director at Clarksons Research, has warned that transit restrictions at the canal not likely to ease any time soon and that disruption ‘could linger into 2025’. ‘Transit restrictions appear likely to remain in place for some time to come, with the rainy season in Panama falling from May to December,’ he told TradeWinds.
However, an unprecedented drought this year has caused water levels at the canal to be the lowest seen at this time of year in nearly a century of data. Panama’s dry season has come early this year with forecasts suggesting there will not be much rain in the coming weeks. Water levels at Lake Gatun, which is the primary feeder into the canal, saw some improvement last month, in comparison to levels in autumn, but meteorologists warn it has not been significant enough. As the region enters its dry season in January, water levels at Gatun are expected to be the lowest ever recorded. Everstream Analytics chief meteorologist Jon Davis said this is ‘an item of concern’, adding that the chances of seeing any improvement during the first quarter of 2024 is ‘remote at best’.
He believes improvement in lake levels or a decrease in restrictions won’t begin until May or June next year, when Panama’s rainy season starts. Panama’s annual dry season normally begins in December and lasts until April or May. The drought, which comes with temperatures already at a 1.2C rise, is being discussed at the Cop28 environmental conference, with delegates hoping to agree to keep global warming at a 1.5C limit. Steven Paton, director of the Physical Monitoring Program at the Smithsonian Tropical Research Institute in Panama, said: ‘This is now our third extreme water deficit in the past 25 years. That is a huge red flag.’ Among the companies operating through the canal are British American Shipping, which moves up to 40,000 containers per year.
Its chief executive Paul Snell told Bloomberg: ‘We face less capacity, more trips, higher costs and a less efficient supply chain. ‘Everyone’s going to have to get creative and decide what they’re going to do.’ He added that the issues had meant the firm could no longer ship fresh-cut ferns from Seattle to flower markets in Rotterdam. And it was now having to haul nuts and dried fruit from California across the US by rail to Texas or Virginia, then transferring them to container ships bound for Europe. But the increased journey times are becoming a problem for fresh fruit from countries including Chile and Peru that ship to Europe through the canal.
Ignacio Caballero, director of marketing for Frutas de Chile, a trade group representing Chilean fruit growers, told Bloomberg that cherries, grapes, plums, nectarines and blueberries could all struggle to get to market. In August, more than 200 ships were stuck on both sides of the canal after the number of crossings was capped by authorities amid the drought. The large vessels, which were likely carrying millions of dollars’ worth of goods, were trapped with some waiting for weeks to cross. The effects have led the canal to estimate a reduction in revenues of up to $200million (£160million) by 2024. Read the full story: https://www.dailymail.co.uk/news/article-12835233/Christmas-supplies-UK-threatened-vital-Panama-Canal-shipping-route-suffers-worst-drought.html?ito=msngallery
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