As the worst drought in decades continues, the Panama Canal is witnessing an exodus of shipowners.The queue of ships has been greatly reducedThe regular Panama Canal has a daily transit capacity of 38 to 40 vessels. As water levels in the canal continued to fall in October to their lowest level in 73 years, the canal authority was forced to announce plans to dramatically reduce crossings in phases over the next few months. The plan says the number of daily canal crossings will be reduced from 31 to 25 from November 3, to 24 from November 8, and to 18 from February 1 next year.A reduction in the number of daily passes had led to a surge in the number of ships queuing to pass through the Panama Canal, but the latest figures show that the number of ships queuing is significantly lower than it was two weeks ago.International shippingAccording to the official data released by the Panama Canal Authority, as of 4:23 local time on December 8, the number of ships that have booked the transit queue is 46, and the number of ships that have not booked the transit queue is 27, a total of only 73 ships. The data on November 22 showed that the number of ships that had booked the transit queue was 60, and the number of ships that had not booked the transit queue was 85, a total of 145.The reduction of half of the ships does not mean that congestion has eased, and the average number of days that ships queue is still significantly higher than half a month ago. According to the latest data from the Panama Canal Authority, the average number of days in line for unbooked vessels preparing to cross the border in the last 28 days reached 12.2 days for the northbound and 6.7 days for the southbound, while the average number of days in line for the northbound on November 22 was 8.3 days, and the number even exceeded 15 days a few days ago.Shipowners’ retreatBehind the significant reduction in the number of ships queuing is the fact that ship owners have become accustomed to the “absence” of the Panama Canal and actively “avoid obstacles”, and the real-time maritime trade map has experienced the largest and most rapid changes in the past month.The main routes served by the Panama Canal are the East Coast of the United States – Asia, the East Coast of the United States – the West Coast of South America, and Europe – the West Coast of South America. Due to the daily quota limit, shippers began to choose to choose the Suez Canal, or bypass the Cape of Good Hope, Cape Horn, Magellan Strait, from the Panama Canal collective “great retreat”.Analysis of ship-tracking data by shipbroker Braemar shows that 95 bulk carriers passed through the Panama Canal last month, compared with 232 in the same period last year.In terms of container ships, Freightos reports that the reduction in the number of daily passes through the Panama Canal is beginning to affect the costs and operations of some shipping companies, with three companies announcing an upcoming surcharge on containers using the canal, and others rerouting routes from Asia to the East Coast of the United States via the Suez Canal.The drought in the Panama Canal has particularly affected the MR Tanker market. Recent figures from BRS, a shipbroker, show that the number of MR Tankers waiting to cross the border has more than halved. The French broker warned that canal-related volatility will be prevalent throughout the first half of 2024, which is typically Panama’s dry season.Earlier, a US diesel shipping company was forced to bypass the top of South America to Chile for the first time since 2020 due to worsening congestion in the Panama Canal caused by drought.According to Bloomberg, the “Green Sky” round is in the process of transferring Citgo Petroleum Corp. Ultra-low sulfur diesel loaded at the Clifton Ridge terminal in Louisiana for shipment to Valparaiso, Chile. Instead of going through the Panama Canal, the ship headed down the east coast of South America to the Strait of Magellan, the first such voyage for diesel cargoes along the Gulf Coast since 2020.The reduction in daily access to the Panama Canal has caused long and widespread delays, which in turn has led to soaring rates for MR Tankers. The cost of transporting fuel from the U.S. Gulf Coast to Chile surged to a record $4.6 million per vessel in late November, more than double the cost at the start of the year, according to Argus data.At a time when freight rates are near record levels, the Green Sky’s current detour through the Strait of Magellan is expected to take a week longer than the regular passage through the Panama Canal.Port throughput in the East and Gulf of Mexico declinedAnother evidence of the “great retreat” of shipowners from the Panama Canal is the dramatic decline in port traffic on the East Coast and Gulf Coast of the United States.Logistics company DescartesSystemsGroup’s latest report shows that in November 2023, U.S. container imports were 2,099,408TEU, down 9% from the previous month. The decline has been most pronounced at East Coast and Gulf Coast ports, which are beginning to feel the impact of the Panama Canal restrictions.Chris Jones, executive vice president of DescartesSystemsGroup, commented: “November is historically weaker than October, and while the decline is significant, it is consistent with previous performance. The impact of the Panama Canal drought is finally being felt, with Gulf Coast ports, particularly the Port of Houston, experiencing significantly lower volumes than the overall decline. East Coast ports also saw a significant decline.”According to the DescartesSystemsGroup report, the Port of Houston, one of the major ports in the East of the United States, saw its imports plunge 26.7% in November, significantly below the average of 9%. The decline in U.S. East ports has helped U.S. West ports gain more market share. The top five ports in the West increased their share of import container throughput to 43.1 percent, while the top five ports in the East and Gulf Coast fell to 42.0 percent.The situation is likely to worsen as a severe drought has been exacerbated by a strong El Nino this year and the Panama Canal Authority plans to further reduce the number of daily crossings in the coming months, the report noted.