The Panama Canal is set to further reduce the number of daily ship transits starting in October as drought conditions, driven by the El Niño weather phenomenon, continue to worsen. The authority overseeing the canal submitted a draft plan to Panama’s parliament outlining a reduction to an average of 29.5 vessels per day, an 18% decrease from the 36 daily transits recorded in August. This follows a previous cut in September, when daily transits were lowered from 36 to 32 due to diminished water levels.
The canal, which spans 82 kilometers connecting the Caribbean Sea to the Pacific Ocean, is a critical international shipping route, handling about 5% of global maritime trade and approximately 40% of container traffic entering the United States. It remains a preferred passage for shippers operating between China, Asia, and the US because it typically cuts transit times and reduces costs.
The drought affecting the region has compromised the canal’s water supply, which relies heavily on fresh water flowing into Lake Gatun from surrounding rivers. The locks system, which elevates ships some 26 meters above sea level to allow passage, depends on adequate water levels to operate safely. As lake levels drop, the Panama Canal Authority has imposed restrictions to ensure both safety and water conservation. In 2023, record low water levels forced a significant reduction in daily transits, from 38 to 22 ships, causing major bottlenecks and compelling shipping companies to seek longer alternative routes.
El Niño, a climate pattern known to disrupt global weather through changes in wind, air pressure, and rainfall, is forecast to peak later this year and is expected to be the strongest occurrence in four decades. The phenomenon has severely affected Central America and northern South America, with nine countries in the region experiencing their hottest June to August period on record. Globally, 52 countries across all continents broke seasonal temperature records during this period, including 18 African countries spanning from Mauritania and Sierra Leone in the west to Eritrea and Ethiopia in the east.
In addition to environmental challenges, shipping operations in the Panama Canal have been further complicated by geopolitical tensions, notably the ongoing conflict between Israel, the United States, and Iran. Disruptions in the Strait of Hormuz, a vital chokepoint for global oil shipments, have increased logistical challenges and overall costs for shipping companies relying on the canal.
Delays at the canal have led to costly queuing incidents; in August, ships reportedly waited up to 10 days to transit, the longest since May. There have been instances where container vessels paid as much as $4 million to bypass the queue through a daily bidding process that allows shipowners to pay premiums for priority passage when demand is high.
With El Niño’s peak approaching, further restrictions on Panama Canal traffic remain a possibility, heightening concerns about the stability of this essential maritime corridor and its impact on international trade.