PANAMA CANAL – New Fees due to climate change

  • PANAMA CANAL – New Fees due to climate change

    PANAMA CANAL – New Fees due to climate change

    Transportation & Logistics Council, Inc.
    Unlike the Suez Canal, which is a sea-level cut without locks, the Panama Canal has to lift vessels up 85
    feet through a series of three locks, and then lower them back down. The engineering utilized water trapped
    in Gatun Lake, which is at the highest point of the passage, and gravity to move the water to raise and lower
    the ships. This requires a continuous source of water flowing into Gatun Lake.

    The new larger locks opened in 2016 and were designed to make more efficient use of the water while
    at the same time providing for passage of significantly larger vessels. The new “Neopanamax” locks are 1400’ long x 180’ wide x 60’ deep as opposed to the older “Panamax” locks that are 1050’ long x 110’ wide x 41.2’ deep.

    Located in a tropical rain forest, Gatun Lake has generally had adequate water supplies to operate the
    canal. However, weather being what it is, there are fluctuations and on occasion, the Panama Canal Authority
    has had to restrict draft of vessels transiting the canal due to low water.

    On January 13, 2020 the Panama Canal Authority announced that due to changing rainfall patterns and
    historic low water levels at Gatun Lake, the main source of water for the waterway, it would implement a
    series of new measures (that began February 15, 2020) to sustain an operational level of water and provide
    reliability to customers while it implements a long-term solution to water supply. As one of the new measures,
    it will start charging two new fees: a new Freshwater Surcharge that affects vessels greater than 125 feet
    length overall and a Vessel Visit Creation Fee that will have two levels depending on a ship’s size.

    From the 1/13/20 press release:
    Despite the use of extensive water-conservation measures, this past year’s rainfall was 20
    percent below the historic average and the fifth driest year in 70 years. It follows several years
    of lower than average rainfall coupled by a 10 percent increase in water evaporation levels due
    to a 0.5-1.5 degree Celsius rise in temperature.
    Without fee and operational changes, the Canal’s water levels are projected to drop to levels
    that would affect the Neopanamax and Panamax Locks. These new measures are intended to
    better provide reliability in water levels and therefore transit schedules.

    The measures include the following components:
    Freshwater Surcharge
    • A new freshwater fee will be applied to all vessels over 125 feet in length overall (LOA) that
    transit through the Panama Canal, and will include the following components: A fixed fee of
    $10,000 per transit and a variable fee ranging from a minimum of 1 percent to a maximum of
    10 percent of the vessel’s toll will be applied depending on Gatun Lake levels at the time of
    transit (i.e. if the lake has a higher level, the percentage will be lower and vice versa).
    Adjustments to the Booking System
    • The Panama Canal will adjust the number of daily reservation slots available to 27,
    replicating the total offered during lane outages. The waterway will also require that each
    vessel pays its booking fee in full no later than 48 hours depending on the booking period.
    o Regulars (up to 90.99 feet in beam): 6 slots
    o “Supers” (up to 107 feet in beam): 13 slots
    o Neopanamax: 8 slots (unchanged)
    • One slot for supers and one slot for regular vessels will be awarded through the auction
    process three days before transits. Nonetheless, the Canal will continue to provide additional
    capacity when possible, serving vessels on a first-come, first-serve basis.
    Vessel Visit Creation Fee (ETA Handling Fee)
    • A handling service fee will be applied to all visits for transit at the time they are created in
    the system. The processing fee will be applied as follows:
    o For vessels 91 feet in beam and over: $5,000.
    o For vessels over 125 feet LOA, but less than 91 feet in beam: $1,500.
    • The fee will be deducted from the vessel’s tolls invoice once the vessel begins transit. If the
    vessel cancels the visit and does not transit, the Vessel Visit Creation Fee will not be refunded.
    All visits created prior to February 15, 2020 will be honored and will not be required to pay
    this fee.
    Together, the new measures will allow the Panama Canal to better anticipate the number and
    type of ships transiting the waterway, and therefore allocate water resources accordingly.
    Visit to view the full press
    release and visit for the Panama Canal website.

    According to a February 20, 2020 report from Reuters, this new “freshwater” charge will cost the
    shipping industry up to $370 million a year and according to the International Chamber of Shipping
    (“ICS”), this charge when coupled with a toll rate change scheduled to go into effect April 1st could cause
    ships to face more than 30% higher costs.

    This is coming at a difficult time for the industry as it is currently having to pay billions of dollars in
    extra fuel costs due to the tough new sulphur emissions rules that started in January and disruption to supply
    chains due to the coronavirus.

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