The canal control system, which relies heavily on fresh water from the artificial lakes Gatun and Alajuela, has been damaged by low rainfall. As a result, the Panama Canal Authority was forced to implement a number of water conservation measures and restrictions on the canal this year to deal with low water levels. As a result, the costs of crossing the Canal also rose significantly.
While an average of ten cargo ships per day passed through the canal in May this year, that number had halved by November. The average cost of traffic, plus standard user fees, was about $500,000 in October, while the new record in November was $2.8 million.
This is not the first time the canal’s operation has been threatened by drought. Similar situations arose in 2019-20 and 2014-16. The problem is that these droughts are becoming more frequent. We can expect traffic on the channel to decline for at least another four months. This type of disruption to global supply chains will have an impact around the world.
Cover image credit: Walter Hurtado/Bloomberg via Getty Images
