World trade set for more chaos as Panama Canal hit by draught

The world trade is likely to be affected as the Panama Canal Authority (ACP) has announced its decision to restrict the number of ships passing through the interoceanic route.

From July 30, the number of vessels allowed to cross daily will be reduced from 36, the number averaged during Panama’s rainy season, to 32.

This decision is linked to the extended drought that has hit the area, causing water shortages since January.

As the Canal’s locks need to be fed water by two artificial lakes – Gatun and Alajuela – in order to work, the prolonged drought has been dictating the number of ships and how much cargo they can carry for months.

The draft – the depth at which a ship can sink underwater – of 13.41 set on May 30 will remain in place for the foreseeable future, the local authorities said.

The ACP said in a statement: “As part of a worldwide phenomenon, in the last six months, the Canal has experienced an extended dry season with high levels of evaporation, with a high probability of an El Niño condition before the end of this calendar year.”

July normally sees Panama being hit by heavy rains and only drying up its water reserves between August and September.

The past months of drought have baffled experts, including Steven Paton, director of the Smithsonian Institution’s Physical Monitoring Program.

He told Panama America.com.pa: “This year [the drought] started in March just like in 2015, on top of that we have the drought in Bocas del Toro and I’ve never seen, during an El Niño Phenomenon, when Bocas is dry, it is usually wetter than average.”

El Niño normally sees an increase in rainfall in the Caribbean area while heat and dry weather conditions hit the Pacific.

But this year, like in 2015, both areas are experiencing a lack of rainfall.

Given the forecasts warning of drier than usual conditions for 2023, Panama’s authorities started implementing a number of water-saving measures from January 3.

Between March 21 and April 21, the ACP said to have seen water levels in Lake Alajuela fall by seven metres.

In mid-May, the ACP banned the passage through the Canal of vessels exceeding the 13.6-metre draft.

Each crossing normally uses some 51 million gallons of water.

Restrictions of this kind are bound to have repercussions on world trade, as the Panama Canal is vital to move goods from various ports, particularly between Asia and the US east coast.

More than 14,200 ships passed through this maritime route in the fiscal year of 2022.