Panama Canal Drought & US Shipping Delays
While the conversation surrounding labor continues in many regions throughout the US, the ports of Long Beach and Los Angeles reported that they had effectively “shut down” due to disruptions staged by the International Longshore and Warehouse Union (ILWU). Similar work actions were also reportedly held at the ports of Oakland, Tacoma, Seattle, and Hueneme.
While official statements from these ports indicated that they were open for business during the week of June 5, 2023, the largest terminals in crucial ports such as Long Beach had canceled all trucking orders for imports and exports, leading many to believe that the ILWU was unhappy over the current state of labor talks.
These shipping issues were further compounded by recent droughts in Central America, which caused the Panama Canal Authority to institute new limitations on the drafts of large, “Neopanamax” vessels. These are the largest vessels capable of transporting goods through the Panama Canal, and limiting their draft to 44 feet (down from an already-reduced 45 feet) makes them incapable of shipping the same quantity of goods that would otherwise be permitted.
This new draft limit went into effect on May 30, 2023, leaving shippers with the following options for transporting their goods:
• Reduce boat landings and overall cargo per vessel to limit their draft.
• Use rail or trucking routes from US West Coast ports to East Coast destinations.
• Ship goods via the Suez Canal and Atlantic Ocean.
All of these alternatives take longer to deliver material than the traditional Panama Canal routes: land transportation from the west to the east extends travel time by an average of 10 days, and Suez Canal routes extend travel time for ships by about 5 days. It’s important to note that these shipping delays have arrived just ahead of the peak global shipping season, which will likely cause further delays.
If these droughts near the Panama Canal continue, they have the potential to combine with the ongoing West Coast port shutdowns, leading to a difficult summer season for essential oil and aroma chemical imports to the US East Coast.
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