Panama Canal limiting traffic because of drought
Reductions in crossings could cost $700 million
PANAMA CITY – A severe drought that began last year has forced authorities to slash ship crossings by 36% in the Panama Canal, one of the world’s most important trade routes.
The new cuts announced Wednesday by authorities in Panama are set to deal an even greater economic blow than previously expected.
Panama Canal Administrator Ricaurte Vásquez now estimates that dipping water levels could cost the country between $500 million and $700 million in 2024, compared to previous estimates of $200 million.
One of the most severe droughts ever to hit the Central American nation has stirred chaos in the 50-mile maritime route, causing a traffic jam of vessels, casting doubts on the canal’s reliability for international shipping and raising concerns about its effect on global trade.
“It’s vital that the country sends a message that we’re going to take this on and find a solution to this water problem,” Vásquez said.
The disruption of the major trade route between Asia and the United States comes at a precarious time. Attacks on commercial ships in the Red Sea by Yemen’s Houthi rebels have rerouted vessels away from the crucial corridor for consumer goods and energy supplies.
The combination is having farreaching effects on global trade by delaying shipments and raising transport costs. Some companies had planned to reroute to the Red Sea – a key route between Asia and Europe – to avoid delays at the Panama Canal, analysts say.
Now, that’s no longer an option for most.
On Wednesday, Vásquez said the canal authorities would cut daily ship crossings to 24, down from 38 a day in normal times last year. Vásquez added that in the first quarter of the fiscal year, the passageway saw 20% less cargo
“It’s vital that the country sends a message that we’re going to take this on and find a solution to this water problem.”
Ricaurte Vásquez Panama Canal administrator
and 791 fewer ships than in the same period the year before.
It was a “significant reduction” for Panama, Vásquez acknowledged. But he said that more “efficient” water management and a jump in rainfall in November have at least ensured that water levels are high enough for 24 ships to pass daily until the end of April, the start of the next rainy season.
Canal authorities attributed the drought to the El Niño weather phenomenon and climate change, and warned it was urgent for Panama to seek new water sources for both the canal’s operations and human consumption. The same lakes that fill the canal also provide water for more than 50% of the country of more than 4 million people.
“The water problem is a national problem, not just of the canal,” Vásquez said.
“We have to address this issue across the entire country.”