Photo credits @ Flickr/ David Blossard under CC BY-SA 2.0 DEED

MSC introduces Panama Canal Surcharge as transit slots shrink, delays increase

The Panama Canal is set to significantly reduce daily neo-Panamax transit slots from eight to five from January 2024, leading to growing congestion and delays for container ships, prompting carriers to announce new fees, with ongoing protests further impacting landside access to Panamanian ports, reports Linerlytica.

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According to Linerlytica, a container shipping market intelligence company, container ships are currently facing slowdowns and congestion in the Panama Canal due to a reduction in transit slots scheduled to take effect on 1 January 2024.

The congestion in the canal has already begun, with 22 container ships, including 14 neo-Panamax vessels, waiting at the end of last week.

In response to increasing congestion, several carriers, including MSC, have announced new charges for transiting Panama. MSC plans to implement a Panama Canal Surcharge (PCS):

“During Q2 2023, the Panama Canal Authority decided to reduce draft from 14.94 to 13.41. Despite several measures to conserve water taken over the last months, lack of precipitation in the area is affecting the water level of the Panama Canal. Consequently, the Panama Canal Authority has recently confirmed further restrictions regarding the number of vessels crossing the canal.

These restrictions, combined with the increase of the Canal Tariff implemented earlier this year, are having a direct impact on overall MSC operations costs.

As a result, pricing for cargo from ASIA to USEC/GULF transiting the Panama Canal will no longer be inclusive of PANAMA CANAL SURCHARGE (PCS). Effective 15th December, pricing will be subject to a PCS of $297/Container,” MSC’S announcement reads.

Until now, container ships have been unaffected by transit restrictions imposed to cope with falling water levels caused by drought. Priority has been given to liner vessels. However, the Panama Canal Authority is now taking drastic measures, reducing the number of daily Neo-Panamax transit slots from eight to five from January 2024, with a weekly limit of 35 transits.

Currently, boxships account for 29 weekly neo-Panamax transits (before adjustment for blanked sailings), of which 18 are northbound (to the US) and 11 southbound (from the US), according to Linerlytica.

The market intelligence company adds that these transits represent 83% of the January transit quota, leaving only 17% for non-container vessels. In February next year, the daily transits will be further reduced to 18, with neo-Panamax transits limited to five per day.

As of 26 November, a record number of 22 container ships (totalling 190,000 TEU) were waiting at the Panama Canal anchorage, 14 of which were neo-Panamax units. Linerlytica expects the situation to worsen over the next two months as the new transit quotas take effect, while ongoing protests are also affecting landside access at some Panamanian ports.

Photo credits @ Flickr/ David Blossard under CC BY-SA 2.0 DEED