The Panama Canal is one of the world’s most vital shipping choke points. Spanning the isthmus of Panama, the canal connects the Pacific Ocean to the Atlantic and avoids having to travel thousands of extra miles out of the way around Cape Horn. Now, unusually dry weather in Panama is depleting the canal of its water, and forcing ships to lighten their loads or seek different routes. Costas Paris reports in The Wall Street Journal:
The Panama Canal is going through its driest spell in more than a century, and an extended lack of rainfall could saddle global supply chains with delays and higher fees to move cargo.
The government agency that manages the artificial waterway implemented travel restrictions in May to avoid ships running aground, and since then some large vessels have had to reduce container loads by roughly one-quarter.
More stringent restrictions are in effect through mid-July, authorities have told ship operators, further limiting cargo tonnage. Meteorologists have warned that the water levels in Gatún Lake—located in the center of the canal—could hit record lows in July with the occasional climate event El Niño bringing higher temperatures and less rain.
Canal officials are hoping the second half of the year brings some relief. Panama is one of the world’s wettest countries, but in the first five months of the year accumulated rainfall in the area around the canal was 47% below the historical average, according to the Panama Canal Authority. The canal opened to traffic in 1914.
The Panama Canal, whose daily water use is triple that of New York City, relies on rainfall. More than 50 million gallons of water are lost to the sea every time a ship moves through the locks. That water is replenished from a reservoir, which is in turn filled up when it rains. If there isn’t enough rain, as was the case during droughtsinthe late 1990s, a number of ships could avoid the passage, according to canal executives.
Officials have spent years planning for more extreme weather events to preserve the canal’s role as a vital trade route and avoid supply-chain bottlenecks like the grounded vessel that clogged the Suez Canal in March 2021. The large containership Ever Given blocked the waterway for six days, causing a backlog of more than 400 vessels and costing billions in trade.
Meanwhile, shipowners and charterers are adjusting their operations to meet the lighter-load requirements and areweighing the costs of routing shipments elsewhere.
Disruptions in the canal’s operations would hurt Southern Hemisphere exporters and importers in the north. Brazilian meat, Chilean wines and bananas from Ecuador are routinely shipped across the canal, along with copper from Chile and liquefied natural gas from the U.S. Gulf Coast. The isthmus connects the Atlantic and Pacific oceans and handles about one-third of Asia-to-Americas seaborne trade.
Any issues also could upend the Panama Canal Authority’s effort to boost business. It spent $5.4 billion for a new set of locks that accommodate larger containerships, aiming to be more competitive with Egypt’s Suez Canal. Routes through the Panama Canal shorten the one-way trip by sea from Asia to the U.S. East Coast by roughly five days.
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