The Panama Canal is facing severe transit capacity restrictions due to its driest October on record, impacting shipping across various vessel types. The Panama Canal Authority (ACP) has reduced the allowable ship draft from 50 feet at the start of the year to 44 feet, affecting around 70% of vessels using the canal. This has led to a reduction in daily transit reservation slots, which will decrease further in the coming months.

Container shipping, particularly larger ships sailing from Asia to U.S. East and Gulf Coast ports, is already feeling the impact. For every foot of lost draft, container ships lose capacity for 350 TEUs, totaling a loss of 2,100 TEUs this year. This has forced liners to sail with lower utilization or to unload, rail, and reload containers across the isthmus. The transit reservation cap is expected to affect schedules, with potential changes in container service scheduling.

LNG and LPG shipping are also significantly affected, with most VLGCs and LNG carriers likely to be rerouted via the Suez Canal or the Cape of Good Hope, leading to longer distances, increased transport capacity usage, and potentially higher rates. VLGC freight futures have already seen a substantial increase due to the canal restrictions.

In summary, the Panama Canal's capacity slash due to unprecedented drought conditions is causing major disruptions across the shipping industry, with container, LNG, and LPG shipping facing significant challenges and changes in their operations.