Panama Canal Turns From Trade Catalyst to Chokepoint
By Ruth Liao. December 5, 2023 at 7:00 AM EST
For more than a century, the Panama Canal has been a catalyst for consumer goods and raw materials flowing between the Americas, Asia and beyond. Thanks to climate change, it’s now a chokepoint.
A drought is reducing water levels in a nearby lake used to manage the depths for cargo ships passing through its locks. That’s led to tonnage restrictions and fewer vessels transiting the shortcut each day, causing delays. Those unwilling to wait have two options: pay hefty fees to jump the queue, or sail a much greater distance around South America, Africa or through the Suez Canal.
Panama Canal Jam Spurs Alternate Ship Routes
Shippers face higher costs with either increased voyages or surging canal fees.
Hapag-Lloyd, the world’s No. 5 container carrier, recently started a “live ticker” showing the rerouting of its ships.
Such choices add costs, creating headwinds for central bankers around the world who are struggling to tame inflation.
According to the IMF’s PortWatch congestion monitor, the number of daily transits through the canal has declined by about one-third since Aug. 1 to 22 vessels. That’s expected to go down even more in coming months, reaching 18 daily crossings by Feb. 1, according to Clarksons Research.
Falling Water Means Fewer Panama Canal Transits
Daily ship crossings have declined by about one-third since Oct. 1
The snarl will only worsen in the coming months as Panama enters its annual dry season, which typically begins in December and lasts until April or May.
“Transit restrictions appear likely to remain in place for some time to come, with the rainy season in Panama falling from May to December, and the months with the greatest average rainfall being October and November,” according to a Dec. 1 research note from Clarksons. “Restrictions may not be significantly eased until the second half of 2024 or later.”
