Imports to U.S. East Coast ports may be delayed by Panama Canal slow down

Some import shipments from Asia to the U.S. East Coast will be delayed by the Panama Canal low water traffic jam just as the Christmas season approaches, according to Paul Snell CEO British-American Shipping based in Huntington Beach, California. U.S. West Coast ports should benefit.

West Coast Ports Will Gain Business

In the second part of his interview with AJOT, Snell warns: “So, Christmas goods urgently shipped from Asia into the East Coast, may not arrive in time. So, from Asia you could come into the ports of LA/LB and rail across country. So, Gene Seroka (Port of Los Angeles) and Mario Cordero (Port of Long Beach) will be happy with me saying that is an option. The move out of China to Vietnam and Taiwan would likely be to the advantage of coming in to the West Coast if you were trying to keep … time and costs low.”

As the Panama Canal becomes a traffic jam, he says, “then you are going have vessels out of sync, out of alignment, and potentially all arriving at one time. So, it will be harder to control the schedule and it will be harder to maintain schedules both in and out of the USA. Cargoes going from Asia to the East Coast? Going the other way from Asia, going through Suez to come to the East Coast is an extra week to 10 days more, I would say. “

Panama Canal Delays

Based on the Panama Canal Authority, he says, “the draft restrictions have been reduced gradually from 15.2 meters to 13.41 meters currently. In addition, and since July 30th, the daily vessel transit capacity has also been reduced from 34-38 ships per day down to the maximum of 32 vessels per day. This includes 10 vessels via the Neo-Panamax locks and 22 vessels via the Panamax locks. It is to be noted the Neo-Panamax locks have always been limited to 10 vessels. CMA/ONE/YM/HAPAG vessels that transit via Panama Canal destined to both the U.S. East Coast and the U.S. Gulf Coast are transiting via the Neo-Panamax locks. Regrettably, the overall draft restrictions will cause some impact to … vessel utilization across the canal, including limitations in loading heavy cargo onboard vessels. Regarding the maximum 32 vessels that are transitioning daily, CMA/ONE/YM/HAPAG does not expect any immediate impact on the schedule integrity. However, they will continue to monitor the situation closely and inform customers in due time.”

The result, Snell says: “it is up in the air with this, and we could … add that there are alternatives to going through the Canal, and that would be to rail cargo across the U.S. There are no rail delays at the moment. The rail is working, but of course it is a lot more costly. It costs about $3,000 to rail cargo across country. And MSC (Mediterranean Shipping Company) has … transship vessels that transship … in Panama and rail across Panama and out.”

So, one solution, Snell says is: “Book with MSC as they avoid the Panama Canal. How does MSC avoid the Panama Canal when other vessels transit in (the) same direction? MSC avoids the canal by discharging cargo in Panama, railing cargo across Panama and providing feeder vessels on the other side of Panama across the Atlantic. There is no cost for using that service. In fact, … it's a very … good price. It's not a costly service. It is in line with the rest of the market. So, you could potentially override the Panama Canal concern without having to face an additional cost.

China Losing Markets

Snell says that “A lot of businesses shifted from China to Taiwan and Vietnam. Much of it was due to the second [COVID] lockdown in China with business owners not wanting to face that ever again. So, they have moved out of China and into these new countries. And of course, it takes time to set up factory operations but also … buying levels have been down on imports as well. So, the imports in the last few weeks have been strong in the lead up to the Moon festival. But we do not know how they are going to be going forward. But imports have been greatly impacted this year. And … import freight rates … have been very, very low. Some of the lowest freight rates we have ever seen in the market and competition to obtain business has been extremely aggressive with everyone desperately trying to get the orders that are shipping.”

Chinese New Year and Lunar New Year starting February 10^th, 2024 “will start to see a slow down when the holiday begins …”

Companies that were strong in China “are now finding out they are not so strong in Indonesia and Vietnam. And of course, if you are now loaded out of those countries, then the freight companies in those countries are changing the … platform of who is in control of the freight. So that is another thing that we are experiencing … buyers are starting to control more of the shipping arrangements. So, we are seeing … powers switching from shipper to buyer at the moment. … And we are also having this same switch from Chinese control into … Vietnamese and Indonesian control. So, it is a strange platform. There is a lot of change going on behind the scenes and regarding the trucking issue, we have insufficient numbers of trucks and drivers to start with. The pandemic proved we had a trucking problem.”

Chinese companies are looking to develop alternative offices to “grow internationally. A lot of them are looking at India. We are seeing a rise in Chinese companies trying to move to Dubai, India, Vietnam, and Indonesia because they want to maintain the volumes that they have enjoyed in the past and they are trying to maintain their profits.”

In terms of COSCO (China Ocean Shipping Company) I have not seen them … really do anything. In fact, … their handling of exports … has been quite odd because they are still having connection problems from Asia into India and the Middle East … in transshipment ports. And they have had cargo stuck in ports for two or three months. And this is with shipping profiles being low. So, I do not know what they have got going on and why they're having … transit time issues, but we've definitely seen transit time issues with COSCO.”