The Panama Canal is one of the infrastructures that has had the greatest impact on the economy during the last century. A key link between two oceans and also the shortest route between them, which has facilitated the shipment of goods by ship for decades. Almost 6% of world trade passes through it, which translates into more than 12,000 ships crossing each year to carry cargo to more than 160 countries.
But the glory of this strategic enclave that connects the two largest oceans in the world will not last forever. The Panama Canal is going through the worst crisis in its history: it is running out of water due to a brutal drought that has lasted for many years. And that is affecting transportation. Container ships are already being forced to reduce their weight and pay fees to cross it.
The situation of the channel Already in 2019 the region recorded a 20% reduction in rainfall compared to the average, making it the fifth driest year since the 1950s. Since then, the authorities have cut the quota of ships that cross the canal in order to save water, at the same time that they have restricted the limit draft of the ships. However, since then things have not changed. Rainfall this year was less than 50% of normal for February through April, according to Everstream Analytics.
And the lakes that feed it are registering very low levels. Gatun Lake, the largest of those that contribute water to the canal, is expected to reach record lows in July. All of this has led to a protocol of transit fees and weight restrictions that kick in as dry conditions worsen.
restrictions. The most important is that larger ships will have to decrease their draft, that is, the depth to which they submerge in the water, which means carrying less cargo or reducing the weight of their cargoes. As indicated in this Bloomberg article, as of May 24, drafts of up to 13.56 meters will be allowed for Neo-Panamax vessels (large ships such as container ships, LPG carriers or dry bulk) .
That could translate to 40% less cargo on some ships, according to Nathan Strang, head of ocean cargo at Flexport Inc. And any bottlenecks could hurt the US energy industry and its economy, considering LNG export expansions. that will take place in the coming years.
Rates. Not only will the draft be limited, but the measures will lead to delays and higher costs since it will mean that more ships are needed to move the same amount of merchandise, sometimes having to divide the heaviest load into two containers instead of one. According to analysts’ calculations, these measures could cost importers and retailers using the route an extra $1,500 per container.
And new tariff impositions. At least four carriers have reported that they are making them pay between $300 and $500 per container, and it is very likely that more carriers will do the same as this crisis continues.
Alternatives. The canal authorities fear that shipowners will end up choosing other routes in order to avoid problems, such as the Suez Canal, which has become significantly cheaper. Others are closely watching the melting of the Arctic due to global warming, which could open up another competitive route north. Or they can use ports in southern California, which would mean loading containers onto trucks or trains bound for population centers in the Midwest and East Coast. The canal project in Nicaragua also sounds like a viable future option.
Why is it running out of water and what can happen. As the Canal Authority (ACP) has been announcing for at least three years, the lack of rain endangers the lock system that helps move ships from one ocean to another. The lake that provides the necessary water to operate the lock mechanism is Gatun, an area of 430 square kilometers. The problem is that the Gatun is drying up.
And to all this is added the enormous waste of water caused by the passage of ships: about 190 million liters of fresh water for each step. If we take into account that 12,000 ships cross the Panama Canal every year, we have a tragedy in the offing. As Cárdenas Castillero, geographer and hydrologist, commented in this BBC article: “The temperature in that area of Panama has increased by an average of one degree in recent years, raising evaporation levels by 10% from both Gatún and the Alhajuela lake. If things stay the same, we could say goodbye to the channel forever. Or, at the very least, it would no longer be a safe passage for boats.
Image: Unsplash (Alex Pagliuca)
In Xataka | We are loading container ships too much and this is slowing things down even more.
