It was expected to be a temporary headache, but it progresses into a chronic migraine. The Panama Canal, through which $270,000 million worth of products travel every year, is experiencing a historic water crisis, forcing limits on the number of ships passing through it each day. According to various Panamanian media outlets, the canal authority has indicated that the loss of revenue due to the crisis will amount to between 500 and 700 million dollars (between 462 and 648 million euros) in 2024. Meanwhile, water level forecasts continue to fall.
The problem is measured in feet. Gatun Lake, a man-made body of water in Panama City that feeds the canal, has fallen from a water level of 88.8 feet at the end of 2022 to just 81.5 feet currently. This is not enough to cross the usual capacity of 38 ships per day. The canal authority is only allowing 20 ships through and could reduce the maximum number to 18 in the coming weeks. And Gatun water level forecasts suggest that water levels will fall even further in March.
The restrictions have caused bottlenecks, delays, increased transport costs and uncertainty about the future of the canal, which celebrates its 110th anniversary this year. “We are at the mercy of Mother Nature,” says Lori Ann LaRocco, author of “Trade War Containers Don’t Lie: Navigating the Bluster.” “Every day that it doesn’t rain enough shows how serious the situation will be in the future.” That will only change if there is enough rain. And that’s not happening for the time being,” adds LaRocco, also a supply chain journalist for the American television channel CNBC.
In a study published January 11 in the journal Nature, a group of scientists warns that the planet will experience more extreme drought conditions like those experienced by Panama as a result of the El Niño phenomenon in the Pacific Ocean – or periods of extreme rainfall. In a conservative scenario, these patterns are expected to impact about 3 billion people on the planet. But in a more fatalistic scenario, there could be as many as 5 billion people (66% of the world's population) by the end of the century.
The inflationary effects of the situation in Panama have been felt by consumers since the middle of last year. 40% of container shipments of goods destined for the United States come through the canal, which serves as an alternative to the road and rail network that connects the country's two coasts, so prices for goods have risen. LaRocco said transporting each container costs shipping companies about $8,000, and any delay puts additional pressure on the prices of goods. Companies are already looking for alternatives. “We have not yet seen a tsunami of containers leaving the Port of New York for Los Angeles, we have not reached that point yet.” But the longer the solution takes [la crisis hÃdrica del Canal]“The more this effect becomes visible,” warns the expert.
Despite investments made a few years ago, costing almost $5 billion, to expand the canal and allow larger ships to enter, it was the climate component that surprised authorities. “The optimization of the train and highway system in the United States and the construction of the Interoceanic Corridor in the Isthmus of Tehuantepec in Mexico are considered real and viable alternatives,” says Roberto Durán, professor and researcher at the School of Government and Public Transformation of the Tecnológico de Monterrey (TEC) in Mexico.
Climate change
In addition, climate change is opening a new route: melting ice caused by global warming in northern Canada is creating a new natural waterway that could connect Asia to Europe via North America. “As global trade grows, that means we need more demand for capacity. And if the Panama Canal is far from being able to expand this capacity, but is limited, then we have a problem there,” says Durán.
As if global trade didn't already have numerous weak points, one more has just been added. The US and UK military response against targets in Yemen linked to Houthi militias has widened the conflict in the Middle East. In retaliation, the Houthis on Jan. 18 attacked merchant ships sailing through the Red Sea, which is connected to the Mediterranean via the Suez Canal. This is another channel through which the heavy movement of goods passes as part of world trade.
“Many shipping companies had begun to choose the Suez Canal to reach the United States on the East Coast and avoid any kind of delay or fee associated with the Panama crossing,” explains LaRocco, “now that we have the attack “The Red Sea also leads to delays and additional costs there.
This leads to the “famous triple crisis,” says Durán. “We had the health problem that caused a pandemic and the reason for closing borders, the geopolitical problem where suddenly people who were thought no longer fighting started fighting and closed routes as a result; And then there is the climate problem,” explains the scientist. For now, the Panamanian government's only option is to look to the sky. Your goose that lays the golden eggs is at stake.
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