Drought reduces the volume of water in this key international waterway, delaying the passage of ships. Thus, final prices rise and the availability of goods in the world is affected
By Carlos Roa
The drought affecting the Panama Canal has had a significant impact on international trade, the New York Times reported last week.
The lack of rainfall has left the canal with insufficient water levels, crucial for the operations of raising and lowering vessels along the lock system, which has led authorities to drastically reduce the number of ships allowed.
Back in September, National Geographic warned about the accumulation of waiting ships on the Pacific side of the canal, according to images captured by NASA’s Landsat 8 satellite.
During August, 135 ships were reported to be waiting their turn to transit the waterway, 50% more than usual on that date. If drought conditions continue, it is expected that ship crossings could drop from 29 per day to as few as 15.
What is Happening?
The shortage of rainfall has drastically affected the levels of the artificial lakes that feed the canal locks, with Gatun Lake being the most impacted. This lake, which covers an area of 430 square kilometers, has presented levels three meters below what is usual for this time of year.
The prolonged drought has significantly reduced the amount of water in the reservoir, and climate change and El Niño are predicted to prolong the dry seasons in Central America until 2024.
The Panama Canal, opened in 1914, is a key player in international trade, facilitating the passage of approximately 40% of the world’s cargo. It connects nearly 2,000 ports in 170 countries, with the United States, China and Japan being the main countries of origin and destination. In 2022, more than 14,000 ships transited the canal, carrying more than 291 million long tons of cargo.
Unlike other strategic maritime trade points, such as the Suez Canal, the Panama Canal relies on fresh water, not salt water, so it shares it with the country’s inhabitants.
This is not normally a problem, as Panama is one of the wettest nations in the world, but the prolonged drought has changed the game.
Consequences of the Situation
The direct result is a significant decrease in the number of daily passages allowed, generating a backlog of vessels waiting their turn to cross.
The impact of this situation extends far beyond Panama’s borders. The independent media outlet Open Democracy points out that the climate crisis is driving up prices around the world by hampering the operation of the canal, affecting the global availability of products from Barbie dolls to natural gas.
Each ship crossing requires about 50 million gallons of fresh water, an amount that rivals the needs of Panama’s four million inhabitants.
The resulting congestion, along with delays and cargo limitations, is putting upward pressure on shipping costs. Experts such as Sonali Chowdhry, a research associate at the German Institute for Economic Research, point out that the uncertainty could force ships to use alternative routes during the dry season, significantly increasing costs and travel times.
The crisis in the Panama Canal is a wake-up call about the interconnection between climate change, water scarcity, and international trade, highlighting the need to address these challenges comprehensively and urgently. Only by doing so can imminent environmental and economic damage be contained.
