The drought that raised alarms in the Panama Canal and will persist into 2024

The images of dozens of ships loaded with containers queuing up to cross the Panama Canal, forming an unprecedented traffic jam on the crucial interoceanic shipping route, made two things clear this year: the water crisis is an urgent issue on the world’s agenda and the impact of climate phenomena will end up costing more and more.

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The road that connects 1,920 ports around the world experienced the second driest year in its history in 2023. The combination of climate change and the El Niño phenomenon was the backdrop for a water shortage that continues to worry canal authorities and your customers. Because it operates with fresh water, the canal suffers from the low level of the lakes from which it is supplied. Everyone is counting down the days until it rains again.

In recent months, a severe drought has forced the Panama Canal Authority to take drastic measures. The usual ship traffic has decreased: whereas before, between 36 and 38 passed per day, now 22 pass through (see infographic). The draft of the vessels (cargo tonnage) also decreased and variations were made in the water usage tariff.

The restriction also caused a notable increase in the number of ships queuing to cross this route that connects the Pacific Ocean to the Atlantic. The peak was reached in August, with 161 ships trapped.

Faced with the crisis, some shipping companies chose to explore alternative routes, although they are longer and more expensive. The restrictions mainly affect taller ships and oil tankers.

According to a Panamanian government report released in early December, the canal recorded in the last fiscal year (October 1, 2022 to September 30, 2023) a decrease in the transit of ships and cargo compared to the previous year. money. In fact, Panama received the highest revenue in its history from roads.

And the economic consequences of the restrictions on the canal will only be visible in the next fiscal period, with the loss of revenue as a result of the drought already estimated at around 200 million dollars.

Katiuska Hernández, journalist for the local newspaper “La Prensa”, highlights that the canal did not lose money because for years shipping companies consolidated their cargo, which means that a single ship carries more tonnage.

“The canal charges per ship and per tonnage, so this year it gave more dividends to the State despite the critical moment. Of course, there are foreign shipping companies that have decided to go through the Suez Canal, others that are through Cape Horn and others that want to continue through the canal, but have to pay more. The reduction in revenue will be noticeable in the 2024 fiscal year”, he highlights to El Comercio.

Rafael del Campo, director of the Exporters Association (ÁDEX), is confident that the situation will return to normal. “The boats keep crossing; If they don’t do it through the canal, they cross to the other side. The effect may be on cost, but not on the inability to reach a destination”, he tells this newspaper. He also highlights that the costs of the measures are passed on to the cargo owners. “Transporters never lose, the loser is always the end consumer”, he adds.

Nowadays the water level is still low, but it has risen a little, which allows the number of daily ships to increase a little. Furthermore, restrictions and measures will continue.

Although it belongs to the government, the canal operates autonomously and announced that the reduction in daily transfers will continue at least until the first quarter of 2024. In addition, it proposed the construction of a third reservoir to have greater water inflow.

“It has been a very challenging year and the summer is not going to get any better. For the first time we had to reduce the number of transits to maintain competitive depth. The reduction project will continue for a few more months. We have the El Niño phenomenon, the dry season, but we calculate that the rains should return in May”, the deputy administrator of the Panama Canal, Ilya Espino, expected this week.

Source: Elcomercio

jack

I am Jack Morton and I work in 24 News Recorder. I mostly cover world news and I have also authored 24 news recorder. I find this work highly interesting and it allows me to keep up with current events happening around the world.