Global trade and economies rely on efficient transportation networks to facilitate the smooth flow of goods between nations. While there are a few important shipping routes that serve global trades as below, one crucial artery of international trade stands out for several reasons and that is the Panama Canal.

The Panama Canal is located within a tiny isthmus (narrow strip of land with sea on either side, forming a link between two larger areas of land) lying between the Pacific and Atlantic Oceans connecting North and South America called the Isthmus of Panama.

Often cited as a modern engineering marvel, the Panama Canal serves as a vital link between the Atlantic and Pacific Oceans and is considered a trade lifeline for countries such as the United States connecting the major trading ports on the East and West Coasts of the United States with the rest of the world; significantly impacting its economic vitality and strength in the global market.

About the Panama Canal

The Panama Canal stretches roughly 80 kilometers from the Atlantic to the Pacific Ocean. The canal utilizes a system of locks, functioning as water lifts, to raise and lower ships from sea level to the Gatun Lake level (26m above sea level).

The locks which have been named after the towns in which they were constructed, Gatún, Pedro Miguel, and Miraflores, consist of chambers that are 33.53m wide by 304.8m long allowing ships with a maximum beam of 32.3m, max draft of 12m and length of up to 294.1m (based on the ship type) to transit.

Traditionally, ships had to navigate around the southernmost tip of South America, Cape Horn, which added thousands of nautical miles to their journey. The construction of the Panama Canal allows vessels to pass through the narrow isthmus of Panama, reducing transit times and saving valuable resources.

Since its opening in 1914 the Canal has serviced more than 815,000 vessels and currently, with around 9,000 employees working 24 hours a day, 365 days a year, the Canal facilitates the transit of over 13,300+ ships per year servicing over 170 countries across 180 maritime routes connecting around 1,920 ports globally.

Cutting Down Transit Times and Costs

By utilizing the Panama Canal, ships crossing from the Atlantic Ocean to the Pacific Ocean or vice versa save approximately 8,000 nautical miles (15,000 km) while ships trading between the East and West Coast of the Americas save approximately 3,500 nautical miles (6,500 km) and ships between Europe and Australasia and South East Asia save around 2,000 nautical miles (3,700 km).

Transiting the Panama Canal also helps ships to cut down fuel costs as the shorter distance and optimized route offered by the canal translates into substantial savings, benefiting both shipping companies and the consumers who rely on the transported goods.

Transhipment route

The Panama Canal prominently features as one of the key transhipment routes in any route planning involved in the shipment of goods between Far East and US East coast, US East Coast to West Coast of South America, or from the US West Coast to Europe.

Some of the major types of ships regularly transiting the Panama Canal are Tanker ships accounting for 24% (Oil/Chemical (15%) and LPG (9%)) closely followed by Bulk Carriers accounting for around 22%, followed by Container Ships accounting for around 16%.

Issues affecting transit/transhipment

While ships on average take less than 24 hours to transit the Canal, owing to the volume of ships passing through the canal, there could be a waiting time for transit through the canal.

Ships that need to transit through the Canal must book the passage in advance and as of the 28th of June, there were about 41 booked and 49 non-booked ships waiting in the queue*.

Depending on the type of ships, wait time could be anywhere between 0-15 days for Northbound traffic and 0-11 days for Southbound traffic*.

The Panama Canal has recently also been facing issues relating to availability of water in the canal watershed, which according to forecasts, could worsen with the arrival of the El Niño phenomenon.

The Canal Administration has implemented procedures such as cross-fillings, cross-spilling and short chamber lockage in the Panama locks and increased the use of water-saving basins in the Neopanamax locks.

They have also minimized direction changes between northbound and southbound transits in Gatun locks, maximized tandem lockage and suspended hydroelectric power generation among other controls. As of the 28th of June 2023, the Gatun Lake Water Level was sitting at 79.7ft (24.3m) projected to drop slightly to 79.5 ft by August 2023*.

Conclusion

The Panama Canal has become a pivotal artery of global trade, greatly impacting the economic vitality of the United States and other neighboring countries, providing a faster and more efficient trade route.

It has significantly reduced transit times and fuel costs, offering considerable benefits to numerous industries and consumers worldwide. The canal supports the seamless transit of various ship types and is integral to key trade routes.

In spite of its current weather and water related challenges, the robust measures employed to manage the situation emphasizes the canal's significance in the global trade matrix and especially for the United States.

* Source : Waterfront Maritime Services