Panama Canal may cut ship traffic further as El Niño strengthens

The Panama Canal Authority, led by the new administrator Ilya Espino de Marotta, is considering more reductions in the number of ship transits through the interoceanic waterway due to drought caused by the strong El Nino weather pattern. In mid-September, daily ship transits had already been reduced from 36 to 32. The canal handles about five percent of global maritime trade and relies on rainwater collected in two reservoirs, whose levels have dwindled because of El Nino.

Each ship requires approximately 200 million liters of water, which is discharged into the sea. In 2023, similar drought conditions forced the canal to cut daily transits from 38 to 22. Espino de Marotta, the first female head of the US-built canal authority, stated that further measures, such as reducing the limit to around 29 slots per day, may be implemented if the drought persists.

The canal's restrictions come as shippers seek an alternative to the Strait of Hormuz, which Iran has blocked in retaliation for the U.S.-Israeli war. Reduced water levels have also led to a decrease in the maximum draft of ships from 15.2 meters to 14.6 meters. Experts warn that long-term restrictions could result in higher shipping costs and longer waiting times for deliveries.

The United States and China are the primary users of the canal, which is crucial for US container traffic. The Iran war has increased traffic through the canal, as it has become a fallback route due to the blocked Strait of Hormuz, a critical conduit for a fifth of the world's oil and gas.