Panama Canal water woes set to continue into 2024, experts predict

Panama Canal water woes set to continue into 2024, experts predict

As the rainy season comes to a close at the Panama Canal, the waterway’s authority has announced that daily limits on transit and vessel draft will endure for the remainder of the year and throughout 2024 as water levels remain unrecovered.

These limitations, imposed to conserve water amid ongoing drought, has effectively resulted in a build up of congestion at the mouth of the key waterway. With the canal handling approximately 5 per cent of world trade, the backlog of ship consequently triggered a spike in freight rates ahead of the incoming Christmas period, reported Reuters.  

Nevertheless, this present week, starting on 4 September, has seen a ship traffic that reflects a “normal” level for this season, according to the Panama Canal Authority (PCA).

The canal’s authority reported that its total vessel crossing a month prior to the end of its 2023 fiscal year reached almost 800 more than what the authority’s budget had accounted for, reported Reuters. This contributed to a sum of more than 13,000 transits throughout the fiscal year, thereby reflecting strong demand by vessel owners.

Despite the easing of the bottleneck at the canal that connects the Pacific and Atlantic Oceans by roughly 20 per cent, waiting times to transit has conversely multiplied in July in several vessel categories, according to Reuters. These limiting factors have, in fact, led to an increase in ship owners opting for alternative routes to avoid such delivery delays.

READ: Panama Canal extends ship depth limit

However, a lack of rainfall over the Gatun Lake which feeds the Canal with its water has meant that the canal’s water-levels reduced to 24.3 metres for September from 26.6 metres in recent years.

Shipping through the key gateway can be very taxing on the 50-mile, trans-oceanic canal. According to Reuters, each vessel that passes through it uses up around 51 million gallons of water from the lake.

The canal authority reported that the lake’s water level normally climbs to around 27 metres following the rainy season in November, before experiencing a slight decrease to below 26 metres following the end of the dry season in April.

Notwithstanding this, experts have gone further to predict more maritime trade disruption in what could be an even drier period in 2024. Reuters added that experts also argue that earlier and more intense dry seasons could see an accelerated rate of evaporation which could result in near-record low water levels by April.

Additionally, US economists and state officials have indeed warned of a significant increase in inflation that the US economy may suffer, due to unprecedented levels of drought in the Panama Canal.

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