Panama Canal is drying up causing global problems

29 August 2023

Reports have been reaching us since May this year of the increasing dryness of the Panama Canal. On the Asia-Europe route, not an immediate obstacle, is probably your first thought. However, in the meantime, the scale of the problem is growing and so are the consequences. This means a local problem has gradually grown into an issue of global proportions. 

The Panama Canal

The Panama Canal in Central America dates back to 1914 and is over 81 kilometres long. Due to its strategic location, it connects the Caribbean Sea and the Pacific Ocean. Without the Panama Canal, maritime traffic would have to go around South America. Approximately six per cent of total world trade uses the canal.

The canal’s standard depth is normally 50 feet (equivalent to 15.2 metres). However, since April this year, the Panama Canal has been experiencing extreme drought. As a result, the depth has initially been limited by half a foot and slots (reservations of passage) have been used as much as possible. This is being done in an attempt to reduce queues.

How drought and miscalculation can wreak havoc on a canal

The level of drought, a direct result of climate change, hasn’t improved throughout the course of the year. Even the population’s drinking water supply has been jeopardised as a result. Panamanian authorities have therefore decided to further curb the maximum depth of ships to 44 feet (equivalent to 13.4 metres). The number of ships per day has been limited to 32, instead of 36-38.

Due to the huge water shortage, the water level in Gatún Lake is falling. This lake runs right through the shipping lane, making it the main source of water for the canal. The Panama Canal has been struggling with water shortages since its widening in 2016. The aim of this widening was to allow larger ships to pass through the canal. Unfortunately, the intended growth never had the desired effect. Indeed, not much later it turned out that the substantially larger locks require much more water than calculated.

Current situation is affecting global shipping

Unfortunately, many ships now have to take a detour, or leave cargo behind, because they aren’t allowed to be fully loaded. There is currently a fleet of about 125 ships waiting for passage. Although it is less than the earlier peak in July of almost 200 ships, but still a huge constraint on shipping.

Alternative routes are logically being used to bypass the canal, which means the problem in Panama is now also affecting shippers shipping on other shipping routes. Furthermore, the US news agency Bloomberg has already indicated in a recent article that this will not only fuel inflation in the US, but it will have an effect on trade worldwide.

Do you have any questions about the situation in the Panama Canal? Or do you have a query about another shipping area? Please feel free to contact us.