More Upheaval For Global Shipping As Panama Canal Cuts Traffic Due To Drought

PANAMA CANAL – With shipping businesses already struggling with difficulties in the Red Sea as a result of ship attacks, news has spread that another vital trade route may be compelled to reduce operations.

A severe drought that began last year led authorities to reduce ship crossings in the Panama Canal by 36%.

Panama’s authorities announced changes on Wednesday, which are expected to have a higher economic impact than originally anticipated.

More Upheaval For Global Shipping As Panama Canal Cuts Traffic Due To Drought

Ricaurte Vasquez, Panama Canal administrator, now anticipates that lowering water levels will cost between $500 million and $700 million US in 2024, up from $200 million US previously.

One of the most severe droughts to ever hit the Central American country has caused havoc on the 80-kilometre channel, generating a traffic jam of vessels, casting doubt on the canal’s viability for international transport, and raising concerns about its impact on world commerce.

“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,” Vasquez said in a statement.

The disruption of the main commercial route between Asia and the United States occurs at a critical time. Yemen’s Houthi rebels have attacked commercial ships in the Red Sea, rerouting vessels away from the critical corridor for consumer goods and energy supplies.

The combination is having a far-reaching impact on global trade, delaying shipments and increasing transportation costs. According to analysts, several corporations were planning to reroute to the Red Sea, a crucial route between Asia and Europe, to avoid delays at the Panama Canal.

More Upheaval For Global Shipping As Panama Canal Cuts Traffic Due To Drought

On Wednesday, Vasquez said that the canal officials will reduce daily ship crossings to 24, down from 38 during typical periods last year. Vasquez noted that in the first quarter of the fiscal year, the tunnel saw a 20% decline in cargo and 791 fewer ships than the same period the previous year.

Vasquez described it as a “significant reduction” for Panama. However, he stated that more “efficient” water management and an increase in rainfall in November had at least insured that water levels remain high enough to allow 24 ships to pass daily until the end of April, when the next rainy season begins.

More Upheaval For Global Shipping As Panama Canal Cuts Traffic Due To Drought

The canal authorities blamed the drought on El Niño and climate change. They urged Panama to find alternative water sources for both operations and human consumption. The same lakes that fill the canal also supply water to more than half of the country’s population of over four million.

“The water problem is a national problem, not just of the canal,” Vasquez went on to say. “We have to address this issue across the entire country.”

SOURCE – (CBC)