The global shipping industry is experiencing a significant shift away from the Panama Canal due to a persistent drought, leading to operational challenges. Currently, only 77 ships are in transit backlog at the canal, down by more than 50 vessels in the past two weeks. However, for those waiting, especially in northbound convoys, average wait times have exceeded 14.5 days. The Panama Canal Authority has reduced the maximum draft on larger locks and halved daily transit numbers due to the drought, expected to persist through at least the first half of 2024.

Facing increased costs and operational disruptions, some ocean carriers have announced surcharges for containers using the canal. As a result, a significant portion of the global merchant fleet is seeking alternative routes via the Cape of Good Hope and the Suez Canal. The impact is evident in reduced transit numbers, with only 95 bulkers completing transits last month compared to 232 in November 2022.

The MR tanker market is notably affected, with the number of MR tankers waiting to transit more than halving. Analysts anticipate continued volatility connected to the canal throughout the first half of 2024, particularly during the dry season in Panama.

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