Turbulence in Panama Canal Operations: ONE CEO Appeals to Government Amidst Transit Restrictions

Ocean Network Express CEO Jeremy Nixon voices concerns over delays as shipowners divert routes; Panama Canal faces challenges with reduced transits due to severe drought.


In response to the latest restrictions on transits through the Panama Canal, Jeremy Nixon, CEO of Ocean Network Express (ONE), has penned a letter to Panama’s President Laurentino Cortizo. The Panama Canal Authority (ACP) shocked the maritime industry on October 30 by announcing a reduction in booking slots and transits. The measures, effective from December 1 to January 31, 2024, will decrease the daily transits from 24 to 18, including both Neo-Panamax and Panamax locks. This move is a response to Panama’s severe drought, the worst in 73 years, leading to a shortage of fresh water for the canal.

Nixon expressed concern about ongoing delays and loading restrictions for large Neo-Panamax containerships, prompting consideration of alternative routes via the Suez Canal. He criticized the lack of significant infrastructure projects to improve water reliability and urged urgent action from the Panama government.

Despite ONE’s desire to remain loyal to the Panama Canal, other shipowners have already started diverting sailings to avoid uncertainty and potential high costs. Bloomberg reported instances of gas tankers making U-turns within 10 miles of the canal due to traffic jams caused by low water levels. The backlog of ships waiting to transit the canal has increased to 99 as of November 8, up from 79 on November 6.

For owners attempting to bypass the queue by purchasing slots at auction, costs are skyrocketing. Japan’s Eneos Group won a bid at $3.975 million, exceeding the previous top bid by $1 million.

The Panama Canal’s popularity stems from its shorter transit times between Asia and the US East Coast compared to other options. However, the current water crisis necessitates urgent measures. The ACP signed a contract with the US Army Corps of Engineers in 2021 to evaluate alternatives, and a preliminary report estimated a $2 billion cost for a new water management system, including a water reservoir. The ACP aspires to have these projects operational by the end of 2026, ensuring an additional supply of 1.4 billion cubic meters over the next few years to meet the canal’s annual requirement of 3.4 billion cubic meters.

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