Weighing the risk in Panama

The construction of the Panama Canal’s third set of locks is hoped to significantly improve the cost efficiency of trade between Asian markets and the east coasts of the U.S. and Latin America.

But as noted in our news section, a recent report calls on shippers and insurers to take active risk mitigation measures to assess and spread the impact of an accident involving a neo-panamax vessel, as a single event could result in much larger losses than typically seen in the shipping industry.

Additional risks of disruption along the route stem from the potential for industrial action by canal workers.

Construction workers from the Grupo Unidos por el Canal (GUPC) and National Union of Workers in the Construction Industry (Untraics) staged regular strikes during the nine-year construction of the canal, over a wide range of issues including pay, changes to labour law and allegations of corruption during the construction, contributing to the two-year delay in completing the expansion.

With construction work on the canal now complete, the highest risk of strike action is from workers operating the canal. In light of safety issues over the new locks, any accident resulting in employee casualties is likely to spur industrial action.

Furthermore, the largest union in Panama, Suntrac, has organised work stoppages over government policy, unrelated to the ACP, indicating a willingness to strike over national issues beyond the authority’s control.
The cost-savings associated with the introduction of neo-panamax vessels could be compromised by draft restrictions imposed during droughts along the canal.

In 2015 and 2016, the ACP imposed increasingly stringent draft restrictions on vessels, decreasing the permitted distance from the waterline to the bottom of the hull and forcing many vessels to lighten their load to comply with the measures.

In April 2016 the ACP reduced the maximum draft by 15 cm and by the same amount again in May 2016.

According to some industry analysts, such measures undermine the competitive advantage of the canal if they require post-panamax vessels to significantly lighten their load.

With water consumption in Panama increasing and additional water diverted to expand the locks, such shortages are expected to remain a major issue.