Festive Trade At Risk Due To Panama Canal Drought
Christmas is a particularly hectic time for one and all, but for the logistics industry it’s nonstop, with goods of all kinds being ferried from one corner of the world to the other ahead of December 25th.
Supply chains need to be robust and resilient at all times of the year but especially so come the festive period so that businesses can ensure happy customers at Christmas.
However, it seems that there may be a spanner in the works for global trade and transportation at the moment, with the Panama Canal now facing its worst drought on record, putting festive delivery times at risk.
It appears that water levels have now fallen to the lowest levels seen since the mid-1900s, the Independent reports, with cargo ships left waiting at ports for weeks as a result of the Panama Canal Authority (ACP) cutting the daily transit number permitted to pass through. Consequently, shipments may arrive four weeks later than originally expected.
History of the Panama Canal
The idea of an all-water route for shipping was first floated by the French back in 1880 but it didn’t come to fruition until Panama’s independence in 1903, where the US agreed to complete construction of the route in 1914 and retain management of it until 1999.
Come 1999, Panama assumed full control over the canal’s operations, maintenance and administration and it’s now looked after by the ACP, an independent government body.
Covering an 80km stretch of water, the Panama Canal helps to save time and costs by providing a maritime shortcut between the Atlantic and Pacific oceans, with over a million ships having passed through from all over the world since it was opened in 1914.
A system of locks with two lanes allows ships to transit through, with the lanes raising the ships to the level of Gatun Lake, 26m above sea level, so cargo can be transported through the Continental Divide. The ships are then lowered back down to sea level on the other side of the Isthmus.
In 2007, an expansion programme was started to double the capacity of the waterway to help meet the demand of global maritime trade, the biggest infrastructure project along the route since it was first constructed.
Typically, the Panama Canal is in full operation all year round, with ships traversing the waterway 24 hours a day. However, this is now at risk because of severe drought conditions, with analysis from Hill Dickinson showing that the number of ships crossing the canal a day has now been reduced to 25, down from the usual average of 36.
It’s expected that this will drop even further from February next year, falling to 18 ships a day, while the ACP has also had to reduce the draft limit from 50ft to 44ft.
The consequence of all this is that ships are having to wait far longer than they usually would to pass through the waterway, with these delays having an impact on the supply chain as a whole, with delays of shipments being seen and costs being pushed up.
Shipping rates are also increasing as a result in other regions, as there are fewer ships available for longer routes. Some companies, however, are taking steps to get around the problem by following longer routes around Cape Horn, the Suez Canal and the Cape of Good Hope, as well as using multiple vessels to spread cargo out to help meet the reduced draft limit.
What’s causing the Panama Canal drought?
Although Panama is one of the wettest countries in the world, it is now facing its worst drought in 70 years or so, with experts predicting that the combined pressures of the El Nino phenomenon, climate change and rising ocean temperatures will see these dry conditions extend well into next year.
El Nino, in particular, appears to be wreaking havoc at the moment. Meaning ‘little boy’ in Spanish, the climate pattern can have a big impact on weather all over the world, with winds slowing down during an El Nino event or even reversing direction, which means that warmer waters in the western Pacific Ocean can spread east, all the way to South America.
And it seems that climate change could potentially exacerbate the issue, with some studies suggesting that it could make the impact of El Nino events worse. We may also even see more frequent super El Ninos, which could have serious socio-economic consequences for one and all.
Whereas other shipping lanes and waterways, the Panama Canal needs to use freshwater resources for its operations rather than saltwater, with millions of litres of water taken from reservoirs to help ships pass through… but this is the same freshwater that is also used for public drinking supplies.
It typically rains for eight months of the year between May and December in Panama, but rainfall has been increasingly sparse over the last few years – and it’s likely that this will only continue as time goes on, with climate change expected to increase the risk of extreme weather events like drought, coupled with more unpredictable rainfall.
Ultimately, it may well become increasingly necessary for those in charge of canal management to find new water sources to ensure shipping can continue to operate as it has done in the past.
According to Marketplace, the authorities are now conducting various feasibility studies to explore their potential options, including building a dam on the Indio River (although this may have the knock-on effect of displacing thousands of local farmers), desalination or deepening existing artificial lakes to help capture and store more rainwater.
It will certainly be interesting to see how canal authorities adapt and evolve to ensure that the canal can navigate its way through this changing landscape. In the meantime, here’s hoping everyone gets their Christmas presents this year.
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