In recent years there has been concern Traffic jams on the Suez Canal repeatedly for headlines – and fears among companies and consumers
Now a shipping company is said to have paid $2.4 million to get through a traffic jam in the Panama Canal quickly.
But why is such an enormous amount being spent, and why could a mega traffic jam on the artificial waterway drive up the cost of goods?
Why are the ships piling up in the Panama Canal?
This year, the Panama Canal is costing a lot of money to cross due to a severe drought. This is accompanied by a lowered water level. This limits the number of ships passing through the canal.
This is accompanied by a big traffic jam. Lastly, they waited around 200 ships in front of the important Pacific-Atlantic connection.
Due to this limit, the canal authority is forced to tighten the restrictions on shipping traffic – and this is costing the ship operators a lot of money.
Before we get into the $2.4 million case, however, the question remains to be answered: What exactly is the Panama Canal?
What is the Panama Canal anyway?
The Panama Canal connects the Pacific and Atlantic. The Pacific Ocean is the largest ocean in the world; it runs along the coasts of New Zealand, Australia, Asia and North and South America. As the second largest ocean, the Atlantic is surrounded by both American continents on one side and by Europe and Africa on the other.
The Panama Canal has 12 locks and is 81.6 kilometers long. About five percent of the world’s freight traffic passes through the artificial waterway. Around 40 percent of US container traffic goes through the Panama Canal.
So this is the Panama Canal, but why did a shipping company now pay the whopping amount of $2.4 million?
Why pay $2.4 million for the Panama Canal?
In the week of August 20th the responsible authorities had held an auction. Time slots for the crossing were auctioned off.
Loud Oystein KalleklevCEO of Advance gas, the contract went to the highest bid of 2.4 million US dollars, which corresponds to around 2.2 million euros. Avance Gas operates gas tankers worldwide and takes care of the transport of liquid gas.
In a conference call, Kallekklev added:
»If you add the normal fee to that, you’re quickly in the region of three million dollars (around 2.8 million euros) to bring a ship through the canal. (…) It is possible to skip the line, but it is extremely expensive.«
It is not yet known who exactly the contract went to. However, LPG or LNG transport companies usually make the highest bids at auction.
Even outside of such auctions, the costs of a regular toll to cross the canal are said to be very high. The Wall Street Journal reports that the costs will be in the region of $400,000. That would correspond to 370,000 euros.
Depending on the size and cargo space of the ship a passage cost between 140,000 and 930,000 euros.
Why has the Panama Canal dried up?
The reason for the drought is the man-made climate catastrophe. Loud Climate change service Copernicus July was the hottest month ever recorded worldwide. Through the Climate change Heat waves and droughts would generally become more common.
As the Panama Canal Authority reported that the situation has improved for the ships affected by the long queue. In numbers this means: There are currently 108 ships at the two entrances to the waterway – compared to the 135 ships from the previous week, the number of ships has fallen significantly.
What role does the Panama Canal play for Germany?
For Germany, the Panama Canal plays a relatively minor role compared to the Suez Canal. Most of the goods destined for Europe reach us via the Suez Canal.
A scientist says:
While around 10 percent of German foreign trade passes through the Suez Canal, this figure for the Panama Canal is probably closer to 3 percent.
Since the companies affected by the current traffic jam find alternative transport routes expensive, this can in turn affect the final price of products.
By the way: The weather phenomenon El Niño is partly responsible for the severe drought, the consequences of which we are likely to feel until 2024.
How do you view the current challenges on the Panama Canal? Do you estimate that the costs incurred by companies will be passed on more to you as end customers, or are you accepting the development with a shrug of the shoulders? Have increased costs for PC hardware already had an impact on your account balance? Feel free to write to us in the comments.
