Capacity concerns over Maersk’s Panama Canal rail bypass

Source: The Loadstar
Date: 18th January 2023

Maersk’s move to insert a land link into its service from Oceania to the US east coast, to bypass the Panama Canal, looks promising, provided capacity stays ahead of demand.

The carrier announced that its OC1 service would not pass through the Panama Canal; the vessels from Australia and New Zealand to the Pacific coast will discharge their cargo at the port of Balboa for it to cross the isthmus by train to Manzanillo on the Atlantic coast, where the boxes will be picked up by a vessel going to Philadelphia and Charleston.

The pattern plays in reverse for cargo from the US east coast to Oceania.

According to Maersk, there will be no delays northbound, but customers may experience delays for shipments headed south.

Two weeks of fairly solid rainfall prompted the Panama Canal Authority to ease restrictions on the waterway this month, raising daily transits to 24 from 20. However, there is concern that the impact of global warming will seriously dent the viability of the canal route, so the 80km rail insert could become a regular feature.

It’s important to mention that carriers are responsible for directly moving cargo by rail.

Rail is there, but what volume can it handle? If you can move it efficiently, this routing makes sense.

The port and rail infrastructure are adequate for now but rail capacity needs to be raised. As more than 80% of the cargo handled by the ports is in transit nowadays, the rail infrastructure must increase its capacity. Currently, it stands at 500,000 teu annually.

The transloading extends overall transit time, with multiple handling in the equation. For some clients, such as those moving pharmaceuticals or perishables, the solution may be less attractive as the cargo takes more time to reach its destination.

In its announcement of the OC1 retooling, Maersk pointed out to clients that it was continuing its weekly sailing from Oceania to the US west coast if they were interested in an alternative to the isthmus rail crossing.

Pointing to the relatively short transits for rail (3-4 hours) and truck (1.5-2 hours), it is believed that overall transit time remained favourable, vis-à-vis other routings such as via the US west coast.

Even if the situation at the canal worsens, Panama will always be the best option in terms of distance. However, we need to be prepared with sufficient trucking and rail capacity for that scenario.

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