A logjam of cargo-carrying ships at the Panama Canal is complicating efforts to import promotional products and other items to East Coast and Gulf Coast ports, according to sourcing executives in the merch industry.

The backup is poised to lengthen the time it takes to import items to East Coast/Gulf Coast destinations at least for a time, and is compelling some supply chain leaders to consider alternative routes for getting goods bound for more easterly U.S. locales landed stateside.

The Panama Canal is a 51-mile waterway that connects the Atlantic Ocean with the Pacific Ocean.

It’s possible that suppliers that keep lean inventories could temporarily see stocks on some products dip below desired levels, resulting in “less inventory in the market” for distributors to sell, says Cheron Coleman, vice president of private brand product development and global supply chain at Trevose, PA-headquartered Top 40 supplier alphabroder (asi/34063).

“With peak shipping season underway, the situation will get worse before it improves,” Coleman opines. “Shipments already caught up in the congestion may be delayed by weeks and suppliers could see a drop in their weeks of supply.”

Jeffrey Nanus, CEO of Norwood, NJ-based eco-friendly hard goods supplier AAA Innovations (asi/30023), says that in his experience normal sailing time from China to New York is 32 days. “We’ve been told to expect 15-to-30-day delays on top of that,” he shares.

A Repeat of the Pandemic-Era Crisis Is Not Anticipated

Still, Nanus and other sourcing pros ASI Media spoke with aren’t, at this point, anticipating anything like the long-term supply chain challenges and related deep inventory shortfalls that occurred in 2021 and part of 2022. Those issues came amid a bounce-back in demand for promo and other imported goods following business lows experienced during the earlier days of COVID-19.

“The bottom line is that there may be a few small bumps in the supply chain, but overall I believe the impact will be minimal as long as things at the canal do not significantly worsen,” says Nanus.

Jing Rong expresses a similar view.

“Currently, we have not experienced issues,” says Rong, vice president of supply chain at Massachusetts-headquartered Top 40 supplier HPG (asi/61966). “I don’t see a huge impact on global supply chains. As for our industry, inventory levels are generally very healthy at most promo companies. In a worst-case scenario, shipments will be routed to the West Coast.”

“The bottom line is that there may be a few small bumps in the supply chain, but overall I believe the impact will be minimal as long as things at the canal do not significantly worsen.” Jeffrey Nanus, AAA Innovations

Pierre Montaubin, CEO of Clearwater, FL-headquartered Top 40 supplier Koozie Group (asi/40480), shares that the firm wouldn’t expect to see many importing challenges to its overall network save for potentially deliveries into the Tampa area. “In that case,” he says, echoing Rong’s comments, “we have the ability to reroute shipments to the West Coast.”

On alternative routing: Suppliers could have East Coast/Gulf Coast-bound cargo transported by ship from Asia through the Suez Canal, an artificial sea-level waterway in Egypt, and then on to North America, notes Coleman.

They could also, as executives have said, have goods shipped to the West Coast and then transported by truck or rail to eastern warehouses – a less efficient and costlier alternative but a viable one still, they maintain. At this point, suppliers ASI Media spoke with aren’t considering price hikes on products to account for any potential increased transport costs.

“We remain dialed into the situation and will continue to work with our service providers on alternative routings, should this become necessary,” Coleman says.

Doug Donnell, chief operating officer at Florida-based Top 40 supplier Hit Promotional Products(asi/61125), noted that a large scale shift by importers to alternative routes could in time lead to congestion at other domestic entry points – like West Coast ports – if the situation in Panama became especially protracted. However, he doesn’t think it will come to that.

“Another mitigation strategy would be to increase planned shipment lead times to account for these delays, which would ultimately lead to holding increased inventory levels,” Donnell noted additionally. “This would take several months to play out from the planning phase all the way through to receipt of inventory, though, and most likely the situation would have improved by then.”

Drought Causing the Ship Backup

The Panama Canal accounts for 46% of the total market share of cargo containers moving from Northeast Asia to the East Coast of the United States, according to the U.S. Department of Commerce.

Located in Panama, a nation at the southern tip of Central America, the canal allows ships to pass from the Pacific Ocean into the Atlantic Ocean – and vice versa. It’s generally considered the most efficient way to move cargo by ship from certain key overseas manufacturing nations in Asia, like China and Taiwan, to the U.S. East Coast, according to shipping leaders.

This is how the Panama Canal works 🚢 pic.twitter.com/69OYWksuWA

— Learn Something (@cooltechtipz) August 18, 2023

The vessel backup at the Panama Canal is a result of drought. There’s been an extended dry season locally that’s reduced water levels. The availability of the right amount of water is needed to enable ships to pass through the canal’s locks. Without adequate water, vessels can’t transit through in as great of numbers as normal, leading to the logjam.

The state-owned Panama Canal Authority says there’s “no historical precedence” for the situation. The authority is limiting the number of vessels authorized to pass through per day to a maximum of 32 – a restriction scheduled to last until at least Sept. 2.

Alan Baer, CEO of shipping solutions provider OL USA, tells Yahoo! Finance that ships also can’t load as heavy they want. “The heavy cargo that some of the U.S. importers and exporters want to load is now being reduced and the ocean carriers are limiting container weight,” Baer says. “And so, you have a lot of products that move into the U.S. that are impacted by those weights restrictions.”

In what may be the beginning of a positive trend, the number of ships waiting to pass through the Panama Canal lessened this week. On Wednesday Aug. 16, there were reportedly a total of 131 vessels, down from the 161 ships reported a week ago.

“Anything,” says Baer, “that’s moving from Asia at the moment to the U.S. East Coast is impacted by these delays.”

Still, promo sourcing leaders like Donnell are remaining optimistic.

“As of right now, we aren't seeing any significant impacts to our shipments going through the canal, but we are watching closely,” he says. “The rainy season there runs from May to December, with October and November historically being the wettest months. I see rain in their forecast every day for the next week. It’s a good sign.”