Context

Drought conditions in the Panama Canal are challenging supply chains that rely on this important waterway to rethink their strategies to move product as shallower-than-usual waters have reduced the number of vessels allowed to traverse the canal per day and restricted maximum ship weights.

What is Panama Canal?

• The Panama Canal was among the defining engineering achievements of the 20th century.
• Completed in: 1914
• Length: 82-kilometre long 
• Connecting Points: The Canal connects the Pacific and the Atlantic Ocean via one of the narrowest isthmi in the world.
• Physical features: The Canal’s principal physical features are
  • Gatun Lake, and the central man-made lake stretching nearly all the way across the Isthmus;
  • Gaillard Cut, the eight-mile-long excavation through the Continental Divide that extends Gatun Lake to Pedro Miguel Locks
  • the locks on both sides of the Isthmus that raise ships between sea level and the lake (Gatun Locks on the Atlantic and Pedro Miguel and Miraflores Locks on the Pacific)
  • the ports of Balboa on the Pacific and Cristobal on the Atlantic

Mapping the Traffic

• Since its completion, it has served as one of the world’s most important shipping routes, providing the fastest way to sail between the Pacific and Atlantic oceans.
• More than 14,000 ships crossed the canal in 2022. Container ships are the most common users of the Panama Canal and transport more than 40% of consumer goods traded between Northeast Asia and the U.S. East Coast.
• The global waterway handles an estimated 5% of world trade. If the situation remains the same, there will be expensive freight costs.

Why is it facing issue?

• Low rainfall: there has been 30 percent below average this year, causing water levels to plunge in the lakes that feed the canal and its mighty locks.
• El Niño: The immediate cause is the El Niño climate phenomenon, which initially causes hotter and drier weather in Panama.
• Climate change: Climate change may also be prolonging dry spells and raising temperatures in the region.