Supply Chain Again Threatened With Panama Canal Ship Backup

by Carolyn Mathas

The Panama Canal, which moves approximately 40% of the world’s cargo, is now dealing with a severe drought. More than 130 ships recently sat at anchor off the coast, waiting to transit the canal. They’ll remain in limbo for 10 or more days or must offload weight by 40% to get through the canal. The number of ships allowed to traverse the channel is limited to 32 daily and must follow new ship weight restrictions. Approximately two-thirds of the canal’s traffic is headed for or leaving the United States.

According to Panama Canal Administrator Ricaurte Vásquez Morales, “The fact is that water variability is different, the rainfall pattern is different and now it is necessary to adjust to a reality that is not necessarily solved by a reservoir.”

Typically, Panama receives upwards of 12 feet of rain annually. However, the Canal has no mechanism to store excess water from wetter years. Excess rain is released into the ocean. This year, rainfall is down by nearly 50%, causing a serious bottleneck that affects a significant portion of products bound for the U.S. East Coast.

Morales said there will likely be drought restrictions between now and September 2024.

Panama is worried that continued dry conditions could be a disaster for the whole country since tolls from the canal make up more than 75% of the annual revenues for the government.

Considerations include diverting water from other rivers and constructing additional reservoirs, as the lakes that feed the canal also serve as the primary source of drinking water for nearby Panama City.

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