There is chaos in the Panama Canal. This creates alternative shipping routes, reduced access to ships and, not least, higher prices.
For more than a century, the Panama Canal, connecting the Atlantic and Pacific Oceans, has made global shipping easier and more efficient. But due to drought, the canal authority has been forced to limit traffic through the all-important canal, and capacity is expected to halve from February.
For Flex LNG and Avance Gas, headed by Oystein Callicliffe, the chaos in the Panama Canal is causing him to pull out of everything. It gives an increase in sailing distances from approximately 10,000 nautical miles to 15,000 nautical miles, and a longer sailing period of two weeks.
Ships now sail, for example, through the Suez Canal in Egypt, or through the Cape of Good Hope in South Africa or Cape Horn in Chile.
Longer distances mean fewer vessels available, and especially larger VLGC vessels are priced out, according to Calcliffe.
– I can’t complain. He says rates have reached “all-time highs.”
VLGC rates are now up to $138,000 per day.
Flex LNG transports liquefied natural gas (LPG), while Avance Gas transports liquefied petroleum gas (LPG). The United States ranks first in the world in LNG and LPG exports, and Calicliff often sources its raw materials from here.
– Long distances cost the company something, but shipping reflects that and the end user ends up bearing the cost, Callicliffe says.
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– I was warned
The channel is no longer used
The problem has always been that the canal was small, Callicliffe says.
-We have almost stopped using the Panama Canal for a year now, says the shipping manager.
Last year, Calicliffe used the channel only twice, and faced unexpectedly long wait times on both occasions.
-We burned ourselves both times, and had to stand in line for days for it to pass. As a result, he says, delivery was delayed.
-It’s not worth the risk.
Flex LNG saw an increase in income in the third quarter of the year, achieving turnover and results in line with what was previously expected. For its part, Avance Gas opens its accounting books for the quarter on November 30.
Record bid of $4 million
The canal authority holds auctions for those who want to get to the front of the queue. Last week, Japanese group Eneos paid a record NOK 44 million to take first place. In addition, there are the usual fees, which can often amount to several hundred thousand dollars.
Bloomberg also wrote about several large LPG vessels it seized U-turn just before the Panama Canaland sailed on an alternative route.
The Panama Canal was first used in 1914, and was later expanded in 2016. Up to 14,000 ships and about 500 million tons of cargo are transported through the canal annually, making up 5 percent of the world’s maritime trade traffic.
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