The drought in Panama has reduced water in the canal. Panama has imposed draft limits on ships. Large container ships sometimes need to offload cargo on one side and have it sent by rail to the other side.
Waiting lines of ships have built on each side of the canal, waiting to traverse it. The delays can be up to 5 days at present, according to the data from eeSea, a forecasting and scheduling company based in Copenhagen, Denmark.
These delays are already causing ships to avoid the canal by using the Suez Canal or even sailing around the Cape of Good Hope to get to Asia. These are much longer routes, but do not have delays. If the issues continue, cargoes will begin to be diverted at the start. That will be bad news for East Coast US ports.
Update: the second article below indicates that ships waiting are in the hundreds, but not as high as some have reported. It’s still a big loss of business for the Panama Canal.
We all know now that the Panama Canal is suffering from a lack of water, due to a prolonged drought. The result is limits on draft of ships traversing it. The Canal has also raised rates recently. So shippers are looking for alternatives.
Just remember that the canal was getting increased use as shippers migrated from US West Coast ports, and started using East Coast ports. The trip is a lot longer in time, but if there is a disruption danger at West Coast ports, it makes some sense. Over the COVID period, East Coast ports such as Savannah and the Port of Virginia have made major investments in inland infrastructure to support better distribution of goods inland. Of course Houston is also a very good port to reach from the Panama Canal and has significant container capacity.
Now we see some results from the merger of the Kansas City Southern railroad, formerly a US Class I line, and the Canadian Pacific (CP) railroad. The new line has significant capacity in Mexico which the KC developed on its own for some years. This new route will allow shippers to send cargo to Lazaro Cardenas in Mexico, a West Coast Mexico port, to Houston or north to Chicago. The route from Asia is longer in time than the US West Coast ports, but days shorter than the East Coast ports, and with excellent penetration to the Central US areas around Chicago and Kansas City.
I think this is a good marketing strategy for the CPKC railroad. Another West Coast port could well get a steady stream of container cargoes. The route would be less sensitive to West Coast US disturbances such as strikes, and less dependence on the BNSF and UP rail systems, both of which are under fire for scheduling issues, and are known to be a bit light on staff, according to recent reports from their various craft unions.
However, when there are no disturbances, the West Coast ports of Los Angeles and Long Beach are still the fast and dependable way to get cargoes into the central US. They are also good fast ways via the land bridge to get cargoes to Europe by transshipping again from the East Coast ports such as New York.
If the West Coast ports can keep on an even keel, I think their efficiency will attract back a good chunk of the trade they lost due to the strike. Trade of all kinds is down, but it’s still considerable.
Ship It Zero is a collective of US environmental groups. It has designed a new scorecard, with separate metrics for shippers and ocean carriers, for decarbonization efforts.
Many shippers, such as Costco, scored very low. And shipping lines were also graded low. The exception was Scandinavian lines and shippers. Maersk was graded B; most would agree that Maersk has been trying very hard to make moves for decarbonization, and is probably the leading liner company in that regard. Ikea also got a good grade, still only a B+ at 89/100.
Naturally both shippers and carriers were outraged, and had all sorts of criticisms of the scorecard. Most of those mentioned in the second article were the usual protestations, which no longer carry much weight. It’s abundantly clear that most carriers and shippers are making only minimal changes in practice to decarbonize.
One of the silliest criticisms is to blame it on the IMO (International Maritime Organization), a UN consortium of countries making rules for shipping. With over 130 members, it’s a surprise they can agree on anything. To say we would do more if the rules were stricter is really nonsense. Companies could do something now.
Ship It Zero points out that few shippers are even quantifying Scope 3 emissions. These are downstream emissions created by the firm’s customers. You can read an extensive and defining discussion in the Supplement to the Greenhouse Gas (GHG) Protocol Corporate Accounting and Reporting Standard.
How could an ocean carrier account for the emissions created by its customers? According to the standard, it could look at how the containers or bulk cargoes were being handled and transported ashore once landed. Are the drayage firms using EVs? What is the power source of the trains? How about storage and pipeline operation, is there leakage, or is excessive carbon or greenhouse gas emission occurring from pumping mechanisms? The same would apply to delivery to the ship.
For instance, Scope 3 emissions would include the GHG emissions treated by the firms producing and selling the fuel for ships. Green fuel sources would get higher scores than conventionally produced bunker fuel. Similarly if LNG were used as fuel, Scope 3 methane emissions from the bunkering sites should be considered, as well as the Scope 1 emissions onboard from burning the fuel.
Retailers can evaluate the Scope 3 GHG emissions created by their suppliers. They can also estimate the Scope 3 carbon emissions from use of the products they sell. Ikea for instance has invested in reducing the weight and materials used in packaging products to lower the carbon impact. Other firms could do the analysis with their products.
So I’m with Ship It Zero when it comes to the score. We can easily debate whether the score is considering all the factors. But there is no question that both shippers and carriers can and should do more, and stop simply greenwashing emissions.
Supply Chain and Logistics 