Severe Drought at Panama Canal Raises Alarms for Global Shipping

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4 Jan 2024

Severe Drought at Panama Canal Raises Alarms for Global Shipping

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Global shipping is feeling the strain as the Panama Canal, a pivotal waterway, grapples with a severe drought. The drought’s intensity is underscored by the sight of ancient forest remains now visible due to drastically low water levels. This alarming situation is not only disrupting shipping traffic but also raising fears about the broader implications for international trade.

The Drought’s Direct Impact on Global Shipping

The Panama Canal’s diminished water capacity is impeding the transit of massive ships that ferry goods worldwide. This situation may cause delays and escalate costs. The canal authority has had to impose restrictions on the number of vessels permitted to traverse, leading to longer routes and additional expenses for some shippers. The severity of the drought has forced the authority to limit the size of ships passing through the canal, resulting in further delays and increased costs for shipping companies.

Long-Term Sustainability and Efficiency at Risk

Moreover, this drought raises serious questions about the canal’s long-term viability and its continued role as a vital global trade route. The Panamanians’ dependency on rainfall presents a genuine challenge; if climate change and severe weather lead to inadequate rainfall, it could substantially reduce the capacity they can offer for global shipping. In fact, transit numbers projected into the beginning of 2024 are expected to drop by about a third from what they would typically be if they had sufficient rainwater.

Broader Environmental Challenges

The drought reflects larger environmental challenges, including climate change and water management issues. These issues are influencing the canal’s operations and could have long-term effects on its sustainability and efficacy. Climate change and an unusually mild El Nino have led to a rainfall deficit and drought conditions through 2023, causing lower water levels in the Chagres River and Lake Gatun. This situation has resulted in a significant decrease in the number of cargo ships transiting the canal.

The canal’s travails reflect how climate change is altering global trade flows. Drought created chokepoints last year on the Mississippi River in the US and the Rhine in Europe. In the UK, rising sea levels are elevating the risk of flooding along the Thames. Melting ice is creating new shipping routes in the Arctic.

Under normal circumstances, the Panama Canal handles about 3% of global maritime trade volumes and 46% of containers moving from Northeast Asia to the US East Coast. The channel is Panama’s biggest source of revenue, bringing in $4.3 billion in 2022.

To allow for 24 vessels a day through the dry season, the canal will release water from Lake Alajuela, a secondary reservoir. If the rains begin to pick up in May, the canal might be able to start increasing traffic, according to Córdoba. 

But those are short-term fixes. In the long term, the primary solution to chronic water shortages will be to dam up the Indio River and then drill a tunnel through a mountain to pipe fresh water 8 kilometers (5 miles) into Lake Gatún, the canal’s main reservoir.

The project, along with additional conservation measures, will cost about $2 billion, Córdoba estimates. He says it will take at least six years to dam up and fill the site. The US Army Corps of Engineers is conducting a feasibility study.

The Indio River reservoir would increase vessel traffic by 11 to 15 a day, enough to keep Panama’s top moneymaker working at capacity while guaranteeing fresh water for Panama City, where developers have erected a mini-Miami of gleaming skyscrapers over the past two decades. The country will need to dam even more rivers to guarantee water through the end of the century.


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