As of: January 23, 2024, 4:25 a.m
From: Foreign Policy
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Climate extremes cause devastating damage to shipping.
The focus is also on the Panama Canal.
The situation could get even worse here.
The Panama Canal is one of the most important bottlenecks in international shipping.
But this is exactly where drought is making itself felt.
The lack of rainfall and El Niño are causing concern for the government and shipping companies.
The big question: Can the channel continue to fulfill its role in the future?
This article is available for the first time in German - it was first published by
Foreign Policy
magazine on January 15, 2024 .
Mexico City – For months, a period of drought has led to major traffic jams on the Panama Canal.
The drought, possibly exacerbated by climate change, has left the canal's water levels at an all-time low - forcing Panama to allow fewer ships through.
The restrictions have caused delays, higher shipping costs and uncertainty about the future of one of the world's most important transport hubs.
“This has fundamentally changed the way shipping through the canal works,” said Soren Stokkebaek Andersen, a regional trade manager at Leth Agencies, a shipping agency.
Drought at the Panama Canal the new reality?
Fears are growing
The situation has also roiled the international shipping industry.
About five percent of world maritime trade passes through the canal, and 40 percent of US container traffic passes through it.
And Panama is heading into the dry season, when restrictions will be further tightened.
Shipping companies that have long relied on the canal are expecting even greater delays and are trying to make route changes.
The result is a complicated logistical problem at the same time as there is a crisis in the world's other major shipping route: the Suez Canal, which is in turmoil due to the war in the Middle East.
As climate extremes become more common, shipping companies, analysts and governments fear that the Panama Canal crisis may not be an aberration but the new reality.
The struggle to deliver goods on time has sown doubts among shipping companies about whether the canal will remain a reliable artery for global trade - and reignited interest in alternatives to the canal.
The drought is “a serious threat to the Panama Canal,” said Joseph L. Schofer, professor emeritus of engineering at Northwestern University.
Because the canal, which was built more than 100 years ago, is not designed to withstand a sharp decrease in rainfall.
The Panama Canal requires rain – 52 million liters of fresh water for each passage
Rainfall is essential for the operation of the canal.
Each passage requires approximately 52 million liters of fresh water to raise and lower ships into the canal.
This water comes from artificial lakes that rely on rainfall.
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Panama's rainy season typically runs from late April to November, but last year October saw 41 percent less rainfall than average - and the low rainfall is expected to continue into this year's rainy season.
In December, the water level of Gatun Lake, the canal's main reservoir, fell to levels unprecedented for this time of year and water levels could fall further in the coming months.
The drought is caused by a strong El Niño, a climate pattern that occurs every two to seven years and is characterized by warm ocean temperatures.
El Niño disrupts atmospheric circulation and weakens or shifts winds that would otherwise have brought more rain to Panama and other tropical countries.
El Niño is part of everyday life - but the recent drought at the Panama Canal is worse
Although Panama is used to El Niño, the recent drought is much worse than usual.
And extreme weather events are likely to become even more common as climate change worsens.
“We haven’t experienced the full force of El Niño yet,” said Nadim Farajalla, director of the climate change and environment program at the Issam Fares Institute at the American University of Beirut.
The consequences will be devastating for Panama.
For one thing, Panama's economy is heavily dependent on the canal.
In 2022, the canal generated revenue of $4.32 billion, which is about 6.6 percent of the country's GDP.
The drought caused by El Niño could cost the canal an estimated $200 million in revenue in its current fiscal year.
But the drought also threatens Panama's water supply.
Lake Gatun, which feeds the canal, also supplies half of Panama's drinking water, and the passage of a single ship requires as much water as half a million Panamanians consume in a day.
Panamanian authorities have responded to the drought with strict controls on canal transit.
In recent months, the Panama Canal Authority has limited passage through the canal from about 36 to 24 ships per day - a limit that will be further reduced to 18 ships in February.
Waiting times at the Panama Canal have increased fivefold in some cases – “Drastic measures”
In an email to
Foreign Policy
, the Panama Canal Authority said it was implementing additional water-saving measures.
It has started reusing water for different lock chambers and allows two ships to pass through at the same time if the ships are small enough.
The canal authority has also tightened draft restrictions, which regulate how deep ships can lie in the water.
Experts believe this could force some ships to reduce their cargo by up to 40 percent.
“These are drastic measures,” said Schofer.
And they have caused frustration among shipping companies.
Ships wait in the Pacific to enter the Panama Canal in August 2023.
© Mauricio Valenzuela/picture-alliance/dpa
Former Panamanian President Martín Torrijos, who led a project to double the canal's capacity in 2006, said the unforeseen restrictions - and resulting backlogs - had caused the canal's users to worry about its future capacity and reliability.
Before the drought, ships could book passage through the canal three weeks in advance or wait in line without booking, Andersen said.
But now waiting times have increased fivefold in some cases, and places are sometimes fully booked months in advance.
The canal authority has started auctioning additional slots to skip the queue.
Recently a record price of four million dollars was achieved for a slot.
Shipping companies have three options, all of which are costly: pay to jump the line, wait, or reroute.
Global shipping in crisis: The Houthis are causing massive problems in the Suez Canal
For those ships that choose to reroute, the three main alternatives are Egypt's Suez Canal, Chile's Strait of Magellan and South Africa's Cape of Good Hope.
The latter two are reliable, but require much longer journeys.
The shortest option is the Suez Canal, an artificial waterway that connects the Mediterranean to the Indian Ocean.
The Suez Canal can also allow more ships through: up to 100 ships can use it in a day, more than four times the Panama Canal's current capacity.
But in view of the armed conflicts in the Middle East, there are also serious concerns about the Suez.
In the Red Sea, Yemen's Iran-backed Houthi rebel group has fired drones and missiles in at least 27 attacks on ships since the war between Israel and Hamas broke out on October 7.
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US and British forces have recently attacked at least 60 targets in 16 locations in Yemen with support from Australia, Bahrain, Canada and the Netherlands.
US President Joe Biden called this a “direct response to the Houthis’ unprecedented attacks on international maritime vessels in the Red Sea.”
As the maritime crisis escalates, ships have changed their routes and four of the world's five largest container shipping companies temporarily suspended their sailings through the Suez in mid-December.
The search for alternative options has sparked interest in trade routes in Latin American countries looking to divert traffic from the Panama Canal.
Alternatives for the Panama Canal: Nicaragua, Colombia, Paraguay and Co. are working on solutions
Some of these routes still need to be built.
In Nicaragua, President Daniel Ortega has said he wants to revive a plan to build an interoceanic canal, but many Nicaraguans reject that prospect in one of the region's poorest and most corrupt countries.
The Colombian plans are perhaps a little more realistic.
In an email to
Foreign Policy
, Colombia's Ministry of Transportation said the government has already developed the first phase of plans for a 123-mile interoceanic train with seven miles of tunnels to connect the country's Pacific and Caribbean coasts.
The ministry expects the project to be ready for tender by the end of 2024.
Other projects have already been completed or are in progress.
Paraguay inaugurated in 2022 the first half of a two-lane highway, the Bioceanic Road Corridor, which will run from Chile through Argentina and Paraguay and end in Brazil.
And on Dec. 22, Mexico opened part of a $2.8 billion rail project designed to compete with the canal by transporting goods between the Pacific and Atlantic Oceans.
However, experts are skeptical that these projects will pose competition to the Panama Canal in the foreseeable future.
Although Schofer sees the Mexican project as promising, he believes it will only work for a small portion of the goods transported between the Atlantic and the Pacific and that the high cost makes it less attractive than the Panama Canal.
Andersen, meanwhile, said global shipping companies are unlikely to rely on untested routes in an industry where reliability is key.
So now
the Panama Canal will continue to be the region's most important trade route.
But if canal authorities fail to respond to increasing climate extremes, they risk going out of business.
Panama wants to save the canal – at the expense of biodiversity and the region’s inhabitants?
One solution proposed by the canal's board of directors would be to dam the Indio River and drill a tunnel through a nearby mountain to funnel more water into Lake Gatun.
This is estimated to cost around $900 million and could easily take six years to complete.
While the canal expansion received widespread popular support in 2006, this project is even more controversial.
A new dam would flood biodiverse land and displace local communities, and politicians are reluctant to support the project ahead of Panama's presidential election in May.
The prospect of a new reservoir has already sparked heated debate.
Political tensions have been high since last autumn.
At that time, demonstrations paralyzed the country for more than a month.
Panamanians were protesting against a hasty government deal that allowed Minera Panamá, a subsidiary of Canada's First Quantum Minerals, to operate a massive open-pit copper mine in the country's biodiverse jungle for at least 20 years.
“We are a canal country, not a mining country,” shouted people on the street.
The protests exposed the country's identity crisis in shaping its future, especially as the canal, the mining industry and Panamanian people compete for water resources, said Raisa Banfield, former vice mayor of Panama City and president of Sustainable Panama, an environmental group.
Regardless of whether the new dam is built, canal authorities must plan ahead, Schofer said.
“Climate accident” in Panama: Is the country finding new perspectives for the shipping canal?
In any case, Torrijos is optimistic.
He believes Panama can act to ensure this is the last climate accident to disrupt transit through the canal.
“I think it creates a positive pressure because it pushes us to develop the potential that we have,” he said of the competition for ship passage.
Schofer also hopes the competition will give the channel “a real incentive to do good work.”
In the long term, he's confident the Panama Canal Authority will find solutions - just as it did on a smaller scale in 2016, when it successfully introduced water conservation basins that reduced the canal's water demand.
“But that will take time,” he said.
“And it will be very interesting to see how they deal with it in the meantime.”
To the author
Mie Hoejris Dahl
is a Danish freelance journalist based in Mexico City.
She reports on politics, economics, environmental and social issues in Latin America and holds a master's degree in public administration from Harvard Kennedy School.
Twitter: @Miehdahl
We are currently testing machine translations. This article was automatically translated from English into German.
This article was first published in English in the magazine “ForeignPolicy.com” on January 15, 2024 - as part of a cooperation, it is now also available in translation to readers of the IPPEN.MEDIA portals.