Tuesday, June 6

An unprecedented drought in the Panama Canal threatens world trade

It was the most important engineering work of the 20th century. Its commissioning in 1914 connected the Atlantic and Pacific Oceans for the first time, allowing maritime traffic to save more than 20,000 kilometers around America. The Panama canal It currently absorbs 6% of world trade, but it is going through one of the worst crises in its history: the lack of water has forced its authorities to restrict the number of ships that use it.

To understand how drought affects the canal, one must first understand its structure and the surrounding geography. Unlike the Suez Canal, which joins the Mediterranean with the Red Sea and is entirely navigable, the Panama Canal has five sets of locks that save the 25-meter elevation that the work crosses due to the hilly setting where it sits

System of locks of the Panama Canal

It is this intricate system of ‘boat lifts’ devised by engineers at the beginning of the century, which makes the canal especially sensitive to the lack of water. For each ship that crosses it, it loses a volume of 200,000 cubic meters of water. Or, what is the same, a cube sixty meters wide, long and high. This occurs because the 80-kilometer-long system is fed entirely by water from Lake Gatun and Miraflores, and is lost in the ocean every time the locks are opened.

dependence on water

The dependence of the level of both lakes (artificially constructed for the Canal), greatly limits the use of the infrastructure in times of drought, forcing maritime transport to load more weight in the same ship, due to the restrictions imposed by the Panamanian authorities.

The canal has struggled with water supply shortages for decades, but the situation worsened in 2016 when it was revamped to expand it to allow much larger ships to pass through. Three years later, in 2019, the structure registered the lowest level of water in the last 20 years: three billion cubic meters (well below the 5.25 billion needed to operate). This occurred because rainfall fell between February and April by 50 percent compared to the annual average in the area, according to Everstream Analytics.

The Panama Canal, victim of a severe drought


However, the situation has only gotten worse since then. The canal authorities anticipate that the water level in Gatun Lake, the larger of the two, will reach record lows this July, which will greatly restrict the amount of cargo the ships can carry. And, since a large part of them transports liquefied petroleum gas, dry bulk and liquefied natural gasany bottleneck will affect the US energy industry and its economy.

channel restrictions

The restrictive measures have already been activated since Thursday with the prohibition of ships that exceed 13.6 meters draft (depth at which the ship sinks under water). This limit will be reduced to 13.4 meters on May 30 and, although it seems like a minor change, the authorities estimate that some container ships will be forced to part with the 40% of its load. Until now, the maximum restriction (imposed in 2019) was 13.1 meters draft.

This has caused According to the financial media ‘Bloomberg’, that at least four shipping companies have already announced extraordinary rates of between 300 and 500 dollars per container from June 1. The restrictive measures will also lead to delays that will mean needing more ships to move the same amount of merchandise. According to calculations of Nathan Strangehead of ocean freight for Flexport Inc. This could cost importers and retailers using the infrastructure an extra $1,500 per container.


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