Property damage and business interruption

14.5, Panama Canal slowdown

Panama: work slowdown by pilots who guide ships through the Panama Canal caused unprecedented delays and created a costly bottleneck for shipping companies. Some 250 Panama Canal pilots wanted a pay raise and formal work contracts and were protesting by giving only limited help to clear tail-backs at the busy trade route. With around 5% of global trade passing through Panama, including Chinese trade with the US East Coast, scores of vessels laden with containers were stretched out off the coast of Panama City, waiting to enter the canal. A week earlier, an average of 90 ships a day were facing long waiting times, well above the average during the non-peak season, according to the Panama Canal Authority. The average time vessels spent in canal waters stood at 42 hours, well above the average of 24.5 hours last year, costing shippers tens of thousands of dollars every day. Around 40 ships a day had been crossing the canal since waiting times began to rise in February. The go-slow action was the largest since Panama took over the canal from the US. Canal authorities denied any labor dispute and said maintenance to one of the canal’s locks had caused the backlog. The canal, which is undergoing a $5.25bn expansion to increase capacity by 2014, is creaking at the seams due to growing Asian trade, making it susceptible to the job action. According to one shipping agent, the delays cost clients up to $500,000 each time they enter the canal. For a large ship, the delay could cost $60,000 each day, plus the cost of buying a transit slot at auction. During the week in question, one slot fetched more than $300,000.