Navigating Canal Constraints: Cargo Delays Prompt Shift to Suez Canal Routes

Dec 12, 2023Market Advisory

In response to the Panama Canal’s ongoing challenges, exacerbated by severe droughts and delays, the maritime industry is witnessing a strategic shift in route planning. The waterway’s reduced capacity due to lower drought limits has led carriers to explore alternative routes to expedite cargo movement. According to industry experts, one increasingly popular approach involves offloading additional cargo at surrounding ports, such as Balboa, Cristobal, or Manzanillo, before attempting the constrained Panama Canal transit. This innovative strategy allows vessels to navigate load restrictions and reroute capacity more efficiently and successfully.

Alternative Routes

As the situation intensifies, some carriers are taking more drastic measures, opting to bypass the Panama Canal entirely in favor of a longer journey through the Suez Canal. While less conventional, this decision has gained traction, especially for eastbound vessels on routes like the Ocean Alliance’s AWE5 service. The eeSea data reveals that since late May, twenty-one vessels on this service have chosen to omit the Panama Canal entirely, with the latest example being the Ever Frank on November 20, 2023. The trend also extends to other routes, with the Ocean Alliance’s AWE8 service noting four other vessels diverting to Suez.

In response to waning confidence in the Panama Canal’s transit capabilities, the maritime industry is witnessing a surge in diversions. Notably, services like THE Alliance’s EC6 and Ocean Alliance’s AWE5 are adjusting schedules, with vessels diverting to the Suez Canal until mid-January. 

Unfortunately, the option to move cargo through the Suez Canal might not be much of a solution as recent attacks off Yemen by Houthi rebels have cautioned shippers, as safety concerns prompt vessels to avoid the area. 

What to Expect

These issues may lead to a notable uptick in traffic via the Cape of Good Hope, impacting both transpacific and Asia-Europe trade lanes. While offering a silver lining for carriers in managing overcapacity, the extended sailing distance presents an opportunity for surcharge application, countering the challenges of rock-bottom market rates. The evolving situation underscores the need for adaptability and strategic route planning in today’s dynamic maritime landscape.

The shift to alternate routes, while addressing immediate congestion and capacity issues, prompts a broader reflection on the maritime industry’s adaptability to changing circumstances. As delays persist, shippers, carriers, and industry stakeholders must remain agile, continually reassessing route options to ensure the timely and efficient movement of goods. The coming months will require flexibility and planning from shippers who want to avoid disruptions. Advance notice of shipments can help TOC Logistics plan effectively as we move into 2024. If you have questions or concerns about how the Panama Canal drought might affect your cargo, contact your TOC Logistics representative today for assistance. We’ll be updating this story as information becomes available. 


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