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The Panama Canal was able to stave off a shipping disaster that threatened to disrupt $270 billion in global trade every year. It was a combination of careful water management and a bit of luck that allowed the canal to survive.
The Panama Canal Authority reduced the number of vessels that could cross the canal each day from the normal 60 to 22 as parched weather conditions gripped Central America last summer. Shippers paid millions to skip the growing queue and avoid waiting times that stretched over two weeks.
Recently, as water levels have risen, the authority has begun to raise the limit. The authority announced on June 11 that it will allow 34 vessels to be allowed daily starting in late July. This is close to the pre-drought limit of 38. Shippers wait now less than two days for the canal. The canal authority responded to questions in writing that if rain patterns remain the same, the waterway may return to full capacity by next year.
The canal authority stated that current forecasts indicate the rains will continue to be constant for the next few month. “If this persists, the canal plans on gradually lifting restrictions, allowing the conditions to return to normal in 2025.”
We continue to operate continuously and safeguard the water consumed by over 2.5 million people. pic.twitter.com/8y5tFbYEOj — The Panama Canal (@thepanamacanal) February 29, 2024
The canal’s turnaround can be attributed in part to successful water management measures. It’s also a result of a wetter-than-expected, dry season in Panama that extends from December through April. And the end of El Nino – the weather phenomenon which left Panama with its least rainy year on record.
The dramatic shift highlights how waterways are increasingly at the mercy extreme weather. Climate change is changing trade flows. The melting of sea ice in the Arctic has created new shipping routes, while droughts have caused chokepoints around the world. has been disrupting traffic in the Red Sea due to security concerns during the Israel-Hamas conflict.
The Panama Canal Authority said that water-saving techniques such as cross-filling – a technique which reuses water within the canal’s lock – and reducing the number of daily transits have helped to offset the impact of the drought. The goal is to raise Lake Gatun, and another reservoir that is connected to the canal, to a level sufficient to maintain trade flows through the next dry period.
“El Nino is gone and La Nina is now in action, bringing more rain than usual,” said Jorge Luis Quijano a former head of the canal authority and consultant. “It remains to be seen if we are able to maintain the 38 transits a day during our normal dry season.”
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Typical circumstances see the Panama Canal handling about 3% of the global maritime trade volume and 46% containers moving from Northeast Asia up to the U.S. East Coast. Shippers are relieved by any increase, as some were forced to take a long route around South Africa and through Chile’s Strait of Magellan in order to get their goods on the market.
Ignacio Caballero is the director of marketing at the Frutas de Chile produce trade association. He said that Chilean fruit growers are among those who are cheering on the recovery. Last year, many of them had their US-bound shipments rearranged due to Panama Canal restrictions.
Caballero said, “The more slots available, the better.”
Exporters of liquefied gas, which is a major fuel for power plants and heating systems, could also benefit from the ease of canal restrictions. The majority of LNG tankers are sailing around Cape of Good Hope due to the relatively low gas prices across Europe and Asia.
Julia Zhao, principal data scientists at analytics provider Dun & Bradstreet said Panama Canal vessel activity could return to pre-drought normal levels in only three weeks if the precipitation is similar levels of 2022.
Steve Paton, director of the Smithsonian Tropical Research Institute’s physical monitoring program, said that the speed at which Lake Gatun fills depends on both rainfall and the number of ships passing through the canal. The canal has to flush out vast amounts of water each time a boat goes through the canal.
“Every forecast that I’ve seen shows more than average rain, which is what we need,” Paton said.
The Canal Authority is examining longer-term projects, such as the construction of additional reservoirs, to increase its water supply. The email stated that there was “no single solution, nor project which can immediately solve the water crisis.”
The canal made proposals to the incoming government, led by President-elect Jose Raul Mulino who will be inaugurated July 1, on how to expand the canal’s boundaries or remove restrictions that prevent the canal from building new reservoirs.
The canal authority reported that “the president-elect, on receiving this information, stated that one of his top priorities was to resolve the water issue.”