PANAMA — The drought affecting the Panama Canal looks to be easing, signaling good news for American companies that ship product from overseas to the Gulf and East coasts.

Thanks to a recent downpour over the man-made Gatun Lake, the Panama Canal Authority said mid-April it planned to receive more vessels in the coming weeks. It said it would gradually allow up to 32 ships to pass through per day, up from 27 allowed in March.

The Authority pointed to its efficient management and administration of water, but also warned the change is contingent upon the weather. It predicted a return to totally normal operations by 2025. Around 6% of all global maritime trade travels through the canal.

The drought, which began last year summer and peaked late in the year, had forced ocean carriers to move a percentage of their ships through the Suez Canal, due to Panama restrictions. But then late last year, in an unfortunate turn of events, those same ships were redirected again. The Israel-Hamas war broke out, and Yemen’s Houthi rebels began attacking Israel-linked ships traveling through the Red Sea and using the Suez. Ocean carriers opted to reroute ships around Africa entirely through the Cape of Good Hope, adding at least 14 days of extra time to a ship’s journey.

Both events — particularly the Red Sea situation — caused ocean container rates to spike. In the weeks following the first attacks, spot rates doubled, according to shipper tracker Drewry. After eight weeks, rates started to fall slowly.

As of now, average ocean spot rates are still elevated. They sit at $2,725 per 40-foot container, a number 55% higher than last year and 92% higher than pre-pandemic 2019. Rates from Shanghai to Los Angeles are around $3,371, up around 85% from last year. Likewise, rates from Shanghai to New York are around 55% higher at $4,382.

Last week, Vincent Clerc, CEO of Maersk, the second-largest ocean carrier, told the Financial Times that conflict in the Red Sea will last “at least until the second half of the year.”

In late April, the CEO of carrier giant Hapag-Lloyd said he expects the conflict to end before the end of 2024.

Rates seem unlikely to fall, at least meaningfully, as long as the conflict continues.

See also:

• Red Sea: Spot ocean container rates rise 61% in a single week
• Red Sea-boosted container rates may be hitting their peak

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