by Lloyd's List

15 August 2024 (Lloyd's List) - SCEPTICISM on the Panama Canal recovery has been all about the weather. Would it rain as usual this rainy season, or has climate change altered the pattern?

Those doubts are evaporating. It’s raining. Gatun Lake water levels are rising fast, on track to return to normal in the coming months. Canal transits continued to rebound in July.

There were an average of 29.61 transits per day through both locks in July, edging up another 2.2% versus June, according to the latest data* from the Panama Canal Authority (ACP). The larger neopanamax locks averaged 8.29 transits per day last month, with the panamax locks averaging 21.32 transits per day.

July’s average was up 6.96 transits per day or 31% from the drought low hit in January, albeit still down 4.23 transits per day or 12.5% versus the same month in 2022, prior to the effects of the drought.

Neopanamax locks: Containerships rebound, LNG carriers don’t

Total transits are less telling than granular data, which shows which shipping segments have returned and which have not.

In the neopanamax locks, the ACP’s most important client base – container liner operators – have now fully recovered from the drought-driven transit restrictions put in place in November.

In July, 166 neopanamax containerships transited the larger locks. That’s two more neopanamax containership transits than in October, the month prior to slot restrictions, and up 41% from this segment’s low in January.

Very large gas carriers are also rebounding steadily. There were 75 VLGC transits in July, the highest number since October, although still down 12% from October levels.

One neopanamax segment continues to languish: liquefied natural gas carriers. Only seven LNG carriers transited the neopanamax locks in July, versus 24 in October.

The ACP introduced a new long-term slot allocation system for neopanamax transits earlier this month, an initiative aimed at wooing LNG customers back, according to the Financial Times.

Panamax locks: Dry bulk transits ramping back up

The smaller panamax locks saw significant jumps in transits last month by dry bulk carriers, crude and products tankers, and general cargo ships.

The decline in dry bulk carriers has been the largest negative factor for the panamax locks amid the recent drought, with grain cargoes from the US Gulf shifting away from Panama during the export season in late 2023 and early 2024.

Most cargoes shifted to the Suez Canal initially, then rerouted around the Cape of Good Hope due to Houthi attacks. Some US grain bound for Asia was also rerouted via land to US Pacific coast ports. Dry bulk is now returning to Panama.

The reopening of the Panama Canal to panamax, ultramax and kamsarmax bulk carriers for the coming US grain export season is widely expected to be a negative for spot rates, given lower overall tonne-miles, to the extent that more cargoes take the Panama versus Cape of Good Hope route, offset to some extent by more cargoes using the Panama route versus Pacific coast ports.

Roar Adland, global head of research at brokerage SSY, said in an online post on Wednesday, “From a dry bulk trade point of view, we are now in the ‘shoulder season’ of US grain exports, which is the biggest beneficiary of a normalised Panama Canal operation.

“With ultramax bulker transits rapidly increasing through the canal once again and kamsarmax transits approaching cost parity with the Cape of Good Hope routing, increased bulker fleet efficiency as a result of a return of the Panama Canal is very much in the cards. This will also take a lot of the sting out of the Red Sea disruptions as a shorter route is once again available.”

Gatun Lake water levels closer to normal

The number of actual daily transits per month lags the number of available slots, but as the ACP increases available slots amid rising Gatun Lake water levels, actual transits increase. There were an average just over 33 slots available per day last month, versus just under 30 actual transits per day.

The number of available slots increased to 35 on Aug. 5, with maximum allowable draught hiked to 49ft (14.94m).

ACP data on Gatun Lake water levels shows a steady increase as rain continues to fall. As of Tuesday, Gatun Lake water levels had reached 26m. Water levels are now much closer to the pre-drought “normal” than to their peak-drought lows.

Current water levels are 1.9m above the drought low reached on July 25, 2023, while only 0.6m below the water level on the same day in 2022, prior to the drought.

* The ACP does not release monthly transit statistics by segment or statistics on total monthly transits. It releases fiscal-year-to-date transits by segment and fiscal-year-to-date total transits since October, the beginning of its fiscal year. Lloyd’s List calculates monthly transits by comparing each month’s cumulative fiscal-year-to-date statistics, and derives transits per day from this data.