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Panama Canal raises fees to offset higher costs linked to low water levels

THE Panama Canal wants containerships and other vessels to pay higher fees to compensate for historically low water levels on the country's largest lakes

Panama Canal raises fees to offset higher costs linked to low water levels

THE Panama Canal wants containerships and other vessels to pay higher fees to compensate for historically low water levels on the country's largest lakes

19 January 2020 - 19:00

THE Panama Canal wants containerships and other vessels to pay higher fees to compensate for historically low water levels on the country's largest lakes.

The higher fees underscore evidence that climate change is impact shipping costs. The Panama Canal authorities are also expected to amend the cost calculus of ocean shipping from Asia to the US west and east coasts, American Shipper reported.



In a shipping advisory, the Panama Canal Authority said the country's total rainfall dropped by one-fifth last year, with the Gatun and Madden lakes that supply the water going into the canal experiencing levels 'below expected norms'.



As a result, the authority said it will introduce a string of measures from mid-February 'to sustain an operational level of water and provide reliability to customers while it implements a long-term solution to water'.



The new measures include levies that will bump up the costs of ocean shipping across gas and chemical tankers and dry bulk. However, container shipping will see an outsize effect, as it represents one-third of total tonnage passing through the canal.



This comes as Asia to the US east coast freight rates are approaching US$1,400 per FEU, making them higher than rates for west coast ports, according to the Freightos Baltic Index.



Ocean shipping costs to east coast ports rose by 23 per cent over the past three months, while west coast port costs went up by 13 per cent.



The notice comes after a year that saw a number of warnings issued by the canal authority to shipping companies that lower draft levels would require vessels to carry less freight in order to transverse this major trade lane. The 43-foot draft restriction means that containers on board would have to be up to 20 per cent lighter on average.



In its advisory, the Canal Authority said all vessels above 125 feet in length would pay a US$10,000 'fresh water surcharge', in addition to a variable fee that could range between one and ten per cent of the vessel's toll, depending on Gatun Lake's water levels at the time of transit.



Along with the fixed fee, the Canal Authority said it would require a $5,000 'vessel visit creation fee' for ships over 91 feet in width to be paid in advance. The fee would be deducted from any toll invoices for a ship.



The Canal Authority will also impose limits on the number of booking slots available to 21 for ships above 91 feet in width, and six for those below.



In December, a daily average of 28 vessels wider than 91 feet travelled through the Canal. In its fiscal 2019 year, the waterway recorded 12,281 transits, a slight increase from the prior year.


WORLD SHIPPING

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