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Panama Canal authority ‘understands’ Maersk’s decision to use rail amid drought

January 13, 2024 01:58 pm | Updated 01:58 pm IST

Low water levels have forced the Panama Canal authorities to reduce the number of crossings, impacting the smooth flow of goods in one of the world’s busiest trade routes

Maersk’s logo is seen in stored containers. File | Photo Credit: Reuters

- The Panama Canal Authority said on January 12 that it "understands" clients' decisions to turn to alternative shipping methods as the canal faces restrictions due to an ongoing drought, and that it was working on solutions to avoid setbacks caused by future climate crises. The Panama Canal is one of the world's busiest trade routes.

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On Thursday, Danish shipping giant Moller-Maersk said it would turn to rail to move some cargo, as low water levels in the Panama Canal have caused bottlenecks, leading lower crossings.

"We will continue to support Maersk's operations, as the announced changes affect just one of Maersk's services - OC1 Oceania - while other services will continue to transit the canal," the Panama Canal Authority told Reuters.

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Authorities vow to find solutions

The authority added it was developing short- and long-term solutions to limit climate anomalies' impact on the trade route, which moves about 5% of the world's commerce. "We understand that our customers, like us, need to adapt their operations due to the impacts of climate variations around the world and the current water shortage in the Panama Canal," the authority said.

Maersk's OC1 service, connecting Australia and New Zealand with the U.S. East Coast cities of Philadelphia and Charleston, South Carolina, via the Panama Canal, will now create two separate loops, one Atlantic and one Pacific.

The workaround comes as vessel owners also are rerouting ships to avoid militant attacks that are disrupting the Suez Canal, its longtime rival trade shortcut, in what has become the largest disruption to ocean shipping since the Covid-19 pandemic.

The Panama Canal typically allowed around 36 crossings a day, but due to the low levels of water required to push boats through the passage, the canal authority has gradually lowered that number. It now allows 24 crossings a day.

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