Panama Canal Cuts Daily Transits to 29: The Supply Chain Crisis Deepens
Draft restrictions tighten to 14.6 m as El Niño drains the canal’s reservoirs, squeezing 5% of global maritime trade.
The Panama Canal, a critical artery for global maritime trade, has reduced its daily ship crossings to just 29 due to severe drought conditions. This marks the lowest capacity since the water shortages of 2023, when transits dropped from 38 to 22 vessels per day. The canal, which handles approximately 5% of worldwide maritime trade, serves as the fastest route between the Atlantic and Pacific Oceans, making its current restrictions a significant concern for international supply chains.
The Panama Canal Authority imposed the latest cuts after water levels in its reservoirs fell sharply due to prolonged dry conditions. The authority emphasized that the measures are necessary to balance trade operations with the need to supply drinking water to Panama’s residents. Each ship transit consumes 200 million litres of water, which is later discharged into the canal’s reservoirs.
Water Shortages and Weather Disruptions: Panama Canal
The drought has been exacerbated by El Niño, which officials describe as the strongest recorded in the past 40 years. The phenomenon has disrupted global weather patterns, extending Panama’s dry season. Erick Cordoba, the canal’s water manager, warned that “there might be no respite from the dry season soon,” with forecasts suggesting it could last until May—well beyond the typical January-to-April window. Rainfall between April and August was 35.8% below the historical average, further straining water reserves.
In addition to limiting daily transits, the authority has reduced the maximum allowable draft for ships from 15.2 to 14.6 meters, forcing vessels to carry less cargo. This compounds the problem, as fewer ships with reduced capacity now pass through the 51-mile canal.
The restrictions come at a time when shipping companies are already navigating disruptions elsewhere. The closure of the Strait of Hormuz to commercial traffic due to U.S.-Iran tensions, along with a Houthi-declared naval blockade on Saudi Arabian ports, has limited alternative routes. The Red Sea and Persian Gulf, traditionally key passages, are also considered high-risk, leaving the Panama Canal as one of the few reliable options for transoceanic trade.
Global Supply Chains Under Pressure
The impact on the shipping industry is already visible. French carrier CMA CGM postponed a planned $150 per TEU Low Water Surcharge from September 1 to October 1. The fee would apply to cargo moving from South America’s west coast to destinations including North Europe, the Mediterranean, and the U.S. East Coast. Industry analysts note that the combination of fewer transits and reduced cargo capacity per ship is likely to increase operational costs, which may ultimately contribute to higher inflation.
Espino de Marotta, the head of the Panama Canal Authority, acknowledged the challenges but expressed cautious optimism. “It is likely that things would not deteriorate as severely as in 2023, but weather remains unpredictable, and preparation is essential,” she stated. With no immediate relief in sight, the canal’s capacity squeeze is set to remain a critical issue for global trade in the coming months.
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