Global shipping gridlock looms as Panama Canal slashes transits amid worst El Nino drought

The Panama Canal will reduce the number of ships passing through it starting September 3 due to drought caused by the El Nino phenomenon, the operator announced on Thursday. The number of vessels permitted per day will decrease from 36 to 34 initially, and then further to 32 from September 15, as low water levels in two artificial lakes that supply the canal are a concern.

Central America is grappling with a severe drought driven by El Nino, which affects global weather patterns. The canal handles a significant portion of global maritime trade and US container traffic, and the Panama Canal Authority stated that lower-than-forecast rainfall in the canal's watershed necessitates measures to ensure the waterway's long-term sustainability.

The water level in the lakes feeding the canal was so low in 2023 that operators had to cut the daily ship transit number from 38 to 22. With the upcoming reduction, waiting times for ships without reservations will increase, as nine out of ten ships use the canal with reservations, and these slots are auctioned off. The operator hinted at the possibility of further restrictions on shipping depending on rainfall.

The canal's main users are the United States, China, Japan, Chile, and South Korea. Water is a sensitive issue in Panama, as the lakes that feed the canal also supply water to half of the country's 4.2 million inhabitants. El Nino, which occurs every two to seven years, is particularly strong this year. Honduras has already issued a drought alert for 80% of the country.