Drought Cuts Panama Canal Traffic by 36%

An intense drought has led to a 36% decline in traffic for the Panama Canal, one of the most important maritime trade routes in the world.

Officials have denied ship crossings 36% as the canal has decreasing water levels from the drought, The Associated Press reported.

According to Ricaurte Vásquez, the administrator of the Panama Canal Authority, the decline of water in the artificial waterway could exceed previous cost loss estimates of $200 million this year, reaching up to $700 million in 2024.

The ongoing drought has disrupted trade, with Panama Canal Authority reporting the driest October in 2023 since October 1950. That month, authorities established reservation slots for transit. In November, the authority adjusted the daily transit to 31 vessels per day as part of its water-saving measures. In normal conditions, 38 vessels per day were permitted to cross the canal.

The canal authority recently reduced the number of vessels allowed through the waterway to 22, Fortune reported. With higher-than-usual rains in November 2023 and more water management measures, officials said there may be enough water to allow 24 vessels per day in the canal through April.

“It’s vital that the country sends a message that we’re going to take this on and find a solution to this water problem,” Vásquez said, as reported by The Associated Press.

The canal serves 170 countries and connects to 1,920 ports, according to the Panama Canal Authority. The drought and shipping restrictions in the Panama Canal, along with conflicts in the Red Sea, could increase shipping costs and delays.

Climate change and the current El Niño have been linked to the drought and declining water levels in the canal, and the declining water levels impact not just global shipping but also water supply for about 50% of Panama. 

“The water problem is a national problem, not just of the Canal,” Vásquez said. “We have to address this issue across the entire country.”

Drought has caused several issues with shipping in the Panama Canal in recent years. Most notably, in August 2023, around 200 ships were stuck in a traffic jam in the canal because of the low water levels, Business Insider reported.

The rainy season for the country is expected to begin in April, which could bring some relief, while El Niño is likely to last through March 2024.