Panama Canal Faces Transit Cutbacks Due to Persistent Drought
As of September 12, 2023, the Panama Canal, a critical maritime route responsible for about 5% of global trade, faces a looming threat of further daily transit reductions due to ongoing drought conditions. The waterway’s administrators have already implemented measures to conserve water, including a reduction in the maximum number of daily vessel transits from 36 to 32 and limiting the vessel draft to 44 feet, down from the usual 50 feet. Despite adjustments to its reservation system to accommodate more unbooked ships and prioritize longer-waiting vessels, a significant backlog persists, with 116 ships currently waiting for passage.
This situation presents several challenges. A reduced number of daily transits and vessel draft restrictions are causing ships to lighten their cargoes, leading to elevated freight costs. These changes have been felt acutely as the Christmas shopping season approaches, a period of heightened demand for various goods. The Panama Canal Authority has considered further reducing daily transits, prioritizing this measure over additional vessel draft reductions. If drought conditions extend for more than a year, the canal might have to reconsider its weather modeling, possibly introducing even more severe restrictions. Additionally, experts warn that next year could see drier conditions, creating an even more significant bottleneck and potentially disrupting maritime trade on a broader scale.
Sources:
https://gcaptain.com/drought-hit-panama-canal-could-further-reduce-daily-transits/
Slow Start for Peak Shipping Season at Port of Long Beach
As of September 13, 2023, the Port of Long Beach, a crucial gateway for trans-Pacific trade, reported a tepid onset for its peak shipping season. In the month of August, the port processed 682,312 TEUs (Twenty-Foot Equivalent Units), marking a 15.4% drop from August of the previous year. Despite this, the numbers rose by nearly 18% compared to July 2023. The port has been aiming to match pre-pandemic levels of cargo movement and has claimed progress in this regard over the course of the first eight months of 2023.
The decline in shipping activity reveals some shifts in market dynamics. The number of imported containers saw a 15.4% decline, while exports decreased even more sharply by 23.1%. Furthermore, empty containers moving through the port were also down by 12.5%. The overall reduced volumes are attributed to overstocked warehouses and changes in consumer behavior toward summer travel and leisure activities. Additionally, recent labor agreements on the West Coast have stabilized the workforce, aiming to reclaim market share that had shifted towards East and Gulf Coast ports. These labor and infrastructure enhancements are part of a larger strategy to maintain the port’s competitiveness in the long run.
Sources:
https://gcaptain.com/port-of-long-beach-sees-modest-start-to-peak-shipping-season/
Sanctions on Russia Impact European Rail Freight Demand
As of September 2023, the demand for rail freight between Europe and Russia has not rebounded to pre-pandemic levels. This decrease in rail traffic has been linked to ongoing sanctions against Russia related to the events in Ukraine. Even improvements in transit times have failed to revive demand.
Although the northern corridor connecting Europe and Russia has seen better transit times, overall rail volumes destined for the European Union have plummeted by over 40% since February 2022.
Sources:
Persistent Rains from Tropical Storm Haikui Cause Chaos in Southern China
Tropical storm Haikui, which originated as a typhoon, has led to relentless rainfall across southern China for a week. After making landfall in Fujian province on September 5, the storm shifted towards Guangdong and Guangxi, resulting in significant flooding, blocked roads, and trapped citizens. Researchers warn that China’s typhoons are intensifying and affecting regions that might be less prepared for such events.
The relentless rains have caused landslides and destroyed infrastructure, which could disrupt the movement of goods. In addition, cities like Shenzhen, known for their robust flood defenses, experienced unprecedented rainfall levels. These factors could complicate logistics and affect supply chains, especially since more rain is expected in the coming days.
Sources:
West Coast Ports Recover Market Share After Labor Agreement
In September 2023, Descartes Systems Group released its Global Shipping Report, revealing trends in U.S. container imports for August of the same year. According to the report, there was a slight uptick of 0.4% in import volumes compared to July, totaling over 2.1 million TEUs (Twenty-Foot Equivalent Units). This growth is in line with historical pre-pandemic peak-season figures. Furthermore, labor issues at West Coast ports were resolved as the ILWU (International Longshore and Warehouse Union) ratified a new agreement, leading to a market share increase for these ports.
The labor resolution is especially crucial when looking at the shifting balance between West Coast and East and Gulf Coast ports. West Coast ports, particularly the Ports of Los Angeles and Long Beach, saw significant volume gains last month. This contributed to a rise in their market share of total U.S. import container volume to 41.9%, up by 3.6% from the previous month. On the flip side, leading East and Gulf Coast ports experienced a decline in market share to 43.1%, a decrease of 3.3%. The Panama drought, though impacting global shipping, has not significantly affected U.S. container imports, as Gulf ports are witnessing their highest volumes this year. Stability seems to be returning to the supply chain, as August figures align well with 2019 metrics and port transit times remain low.
Sources:
Bidding War Intensifies for Bankrupt Freight Terminals
A new leading bid has emerged for the terminals of a bankrupt freight company, Yellow. Court documents released on Wednesday, September 13, 2023, revealed a fresh bid of $1.525 billion. The Delaware bankruptcy court indicated that this new offer surpasses the previous one of $1.5 billion. With the deadline for a court ruling approaching on September 22, the new bid has been declared the best so far. An auction for these terminals is planned for late November if required.
This situation is noteworthy for those involved in logistics and freight services. The bankrupt company’s terminal portfolio sets a baseline for industry asset values, and the outcome could impact terminal availability and pricing in the sector. More importantly, the sale includes options like 30 days of rent-free equipment storage, which is worth more than $10 million. It should be noted that large unsecured claims, particularly those relating to pensions, still have to be resolved, and these could exceed $6.5 billion. The selling company also owns a significant amount of rolling stock, with a potential sale set for mid-October. The case draws the attention of numerous parties, highlighting its significance in the logistics and shipping industry.
Sources:
https://www.joc.com/article/bnsf-deploying-cameras-drones-boost-terminal-cargo-flow_20230901.html
