Climate Change Impacts the Panama Canal, Over 200 Ships Stuck In A ‘Traffic Jam’

Just two years after the unfortunate blockage at the Suez Canal, the Panama Canal is currently making headlines due to a drought-induced “traffic jam.” 

According the Wall Street Journal, over 200 vessels are currently stuck waiting to transit through the canal due to what could be the most severe drought it has experienced in more than a hundred years.

The canal is an 82-kilometer shipping route that connects the Atlantic and Pacific oceans. It’s a man-made waterway that relies on rainwater — about 50 million gallons of water per day — to operate at full capacity. When there isn’t enough rain, authorities need to cut down the traffic through it to conserve water. Those that are allowed to pass through will also need to pay higher fees, increasing transport costs for cargo owners.

Because of the drought, the WSJ reports that daily traffic has been restricted to just 32 ships, versus the average of 36 “under normal conditions.” The waterway’s Pacific and Atlantic entrances are dotted with vessels that have been waiting for over 20 days. Many of the ships are bulk cargo or gas carriers that are typically booked on short notice. Some operators have opted to reroute their vessels to avoid the traffic jam. 

Canal administrator Ricaurte Vásquez Morales said at a press conference in July that the cap on the number of transits allowed per day could be in place until the end of the year, and the backlog is expected to cost the canal about $200 million in lost revenue.

He also said expressed concern over how the worsening drought is threatening not just its revenue but the canal itself.

“We have to find other solutions to remain a relevant route for international trade,” Vásquez Morales said. “If we don’t adapt, we are going to die.”

Information for this story was found via the Wall Street Journal, Twitter, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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