Panama Canal Closes Fiscal Year 2021 with Record Tonnage

Panama Canal fiscal year 2021 data
Panama Canal fiscal year 2021 data
Panama Canal fiscal year 2021 data. Image: Panama Canal Authority.

The Panama Canal closed its fiscal year 2021 with a record-breaking annual tonnage of 516.7 million Panama Canal tons (PC/UMS), coming in 8.7% higher compared to the 2020 fiscal year (FY20) and 10% above tonnage registered in FY19, the waterway’s last pre-pandemic fiscal year, according to data released by the Panama Canal Authority (ACP).

The gains were despite fiscal year 2021 for the Canal being marked by unprecedented supply chain challenges caused by the continued impact of the COVID-19 pandemic. Related disruptions drove container rates to rise exponentially and production to slow down across various sectors, due to raw material shortages, according to the ACP.

Amid this landscape, the Panama Canal saw traffic grow between October 1, 2020 and September 30, 2021, driven by liquefied natural gas (LNG), liquefied petroleum gas (LPG), containerships, dry bulkers and vehicle carriers.

Containerships continue to reflect a surge in demand for finished consumer products, as increased purchases during the pandemic stressed supply chains and caused congestion in ports worldwide, ACP data indicate.

Containerships registered 184.3 million PC/UMS tons through the Panama Canal this year, according to the Panama Canal Authority, a 2% increase from tonnage compared to FY20, followed by dry bulk (90 million PC/UMS tons), chemical carriers (65 million PC/UMS tons), LNG (61 million PC/UMS tons) and LPG (52.8 million PC/UMS tons).

LNG carriers registered a 31.4% increase in tonnage through the Panama Canal, representing the largest gain across all segments. LNG also set new annual records for total tonnage and transits, in addition to monthly tonnage and transit records in January 2021, fueled by record winter temperatures in Asia.

“I am grateful for and proud of our world-class workforce, whose resilience and dedication allowed us, throughout the pandemic, to continue providing a service of excellence and enabling the uninterrupted delivery of essential goods around the world,” Panama Canal Administrator Ricaurte Vásquez Morales said. “This commitment was key in our ability to manage a record tonnage, which reinforces the expanded Canal’s value to global trade after five years of successful operations.”

More LNG terminals located in in the Gulf Coast and the East Coast of the U.S. expanded their operations, spurring an increase in exports shipped to Asia, ACP data show.

“LNG is not only growing the fastest, but it has had its best year in terms of tonnage through the Canal,” said Ilya Espino de Marotta, Deputy Administrator of the Panama Canal. “However, this year’s figures across segments demonstrate the Canal can adapt and meet fluctuating market needs, as shown earlier this year, when we modified the Panama Canal reservation system to offer our customers additional booking options and flexibility.”

Panama Canal in FY 2021.
Main market segments that traversed the Panama Canal in FY 2021. Image: Panama Canal Authority.

LPG and vehicle carriers followed LNG in segment growth, closing FY21 with an 18.4% and 15.6% increase in tonnage through the waterway, respectively.

“While the latter saw growth in FY21, vehicle carriers are yet to fully recover from the pandemic-driven dip in traffic, similar to passenger vessels, which are expected to continue their gradual return to the waterway in FY22,” the ACP said in a statement. “Their return will be supported by proposed modifications to the segment’s tolls, which are expected to be approved in the coming weeks.”

The main trade routes using the Panama Canal by tonnage in FY21 included the U.S. East Coast—Asia, followed by the U.S. East Coast—West Coast of South America, West Coast of South America—Europe, South America Intercoastal, and the East Coast South America—Asia route, the latter of which replaced the East Coast U.S.—West Coast of Central America route in the Canal’s top five routes. South Korea also moved up the ranks to become the fourth top user of the waterway this year, preceded by the United States, China, and Japan, with Chile coming in fifth.

All in all, the Panama Canal recorded a total of 13,342 transits in FY21, driven by an increase in Neopanamax transits. Though their average size increased, Panamax transits declined in total, an anticipated shift accelerated by the impact of the COVID-19 pandemic, as shipping lines consolidated more cargo onto larger ships to decrease frequent transits.

To help facilitate this transition, the Panama Canal increased the maximum allowable length (LOA) for vessels transiting the Neopanamax locks, a move made possible by the waterway’s experience operating the Expanded Canal. The waterway also began offering a 50-foot draft, the highest level allowed at the Neopanamax locks. The higher draft, which was achieved through water management and an increase in rainfall, eventually increased the waterway’s capacity to maneuver larger and heavier vessels.

The Panama Canal also advanced its commitments to accelerating the decarbonization of shipping in FY21. In January 2021, the Panama Canal announced the creation of the CO2 Emissions Dashboard, which calculates the carbon dioxide (CO2) emissions saved by vessels that choose to transit the Panama Canal over the most likely alternative route.

Panama Canal in FY 2021
Main trades routes for the Panama Canal in FY 2021. Image: Panama Canal Authority.

Building on these and other efforts, the waterway in April 2021 committed to becoming carbon neutral by 2030, with plans already underway to invest roughly $2.4 billion in modernizing its equipment and infrastructure to meet this commitment. The Canal will also spend $2.8 billion in maintenance, as well as $500 million in digital transformation initiatives to maximize its capacity and value offered to customers for years to come.

The Panama Canal Authority said it is working on its roadmap outlining the specific steps it will take to reach carbon neutrality by 2030, from generating electricity from renewable sources to migrating the Canal’s fleet to electric vehicles and hybrid tugboats.

Also in the works, according to the ACP, is a pricing strategy that promotes the efficiency and low-carbon emissions of the ships that transit the waterway. At the AAPA Latino conference in Colombia in early December, Panama Canal Administrator Vásquez Morales revealed that the ACP plans to implement a green vessel classification system that will include a new greenhouse gas (GHG) emissions fee, with financial penalties for shipowners rising based on emissions volumes.

Under the new system, ships with an overall length greater than 125 feet in length (38.1 meters) will be classified in levels depending on their energy efficiency. A ship’s classification level will be determined by three factors: the ship’s EEDI (Energy Efficient Design Index) score; its use of efficient operational measures; and its use of zero-carbon biofuels or carbon-neutral fuels.

As of press time, fee amounts and a timeline for implementation had yet to be announced.