Panama Canal to Cut Ship Traffic Further Amid Severe Drought

The Panama Canal Authority announced it will further reduce the number of daily ship transits from 36 to 32 starting September 15, citing severe drought conditions linked to the El Niño phenomenon. This measure follows an earlier reduction from 36 to 34 ships per day, effective September 3, due to critically low water levels in the Gatun and Alajuela lakes, which supply the canal.

Central America is experiencing a significant drought, exacerbated by El Niño, a weather pattern that warms Pacific Ocean surface temperatures and disrupts global weather patterns. Rainfall in the canal's watershed from May to August has been 34 percent below its historical average, with the authority warning that El Niño could worsen the situation. The canal is a vital artery for global trade, handling about five percent of the world's maritime traffic and approximately 40 percent of U.S. container shipments.

In response to the water shortage, the canal operator has implemented various water conservation measures, including reducing the maximum draft for the largest ships. These restrictions are crucial for the "long-term sustainability" of the waterway. In 2023, extreme low water levels forced a drastic reduction in daily transits, from 38 down to 22.

The upcoming reduction is expected to increase waiting times for vessels that do not secure reservations. While most ships (nine out of ten) use reservations, the remaining slots are auctioned. Recent auction bids have reached extraordinary levels, with one shipping company paying $4 million in April for passage, a stark contrast to the pre-Iran war average winning bid of $135,000. The authority has not ruled out further restrictions depending on future rainfall.