Due to the most severe drought in over 70 years, the Panama Canal is imposing additional reductions to the number of ships that can pass through the crucial waterway, as announced by authorities.
According to the Panama Canal Authority (ACP), this decision stems from October being the driest month since record-keeping commenced in 1950. They attribute the drought largely to the El Niño weather phenomenon.
These limitations are likely to escalate the cost of global shipping. The Panama Canal plays a pivotal role in reducing both the duration and distance for ships navigating between the Atlantic and Pacific oceans. Operating continuously, the canal witnesses passage of 13,000 to 14,000 ships yearly, as per ACP data.
The ongoing drought in Panama is being exacerbated by the naturally occurring El Niño climate pattern, marked by unusually warm water in the central and eastern tropical Pacific Ocean. Consequently, water levels in the Gatun Lake, which primarily feeds the canal’s lock system and is replenished by rainfall, are plummeting to historic lows for this time of year.
From November 3, the ACP has announced a reduction in booking slots to 25 per day, down from the current 31. By February 2024, this will be curtailed further to just 18 slots daily. To conserve the dwindling water resources, the ACP has been progressively imposing passage constraints over the past few months.
Earlier in the year, the ACP made an unprecedented decision to reduce the number of ships passing through, leading to significant delays. Scores of vessels are currently in waiting, driving up shipping rates globally due to a decreased number of available vessels, as highlighted by a note from the US Energy Information Administration. Specifically, this has inflated the costs for transporting liquefied gas from the US, with certain gas transporters facing record delays in Panama.
