The Panama Canal is planning to cut shipping traffic again due to worsening drought caused by the El Niño climate phenomenon, further closing one of the world’s most important shipping routes.
The canal handles 5% of global maritime trade and about 40% of US container traffic; it is preferred by shippers because it typically reduces shipping costs and times, especially for companies trading between China, Asia and the United States.
According to a draft plan submitted to Panama’s parliament, an average of 29.5 ships per day will be allowed to transit from October, down 18% from 36 in August. In September, authorities cut daily services from 36 to 32 due to drought.
The US and Israeli war with Iran and the exit from the Strait of Hormuz have complicated logistics and increased costs for shipping companies using the canal.
In August, as ships waited 10 days to enter the canal (the longest since May), a container ship reportedly paid around $4 million (£3 million) to bypass the queue. Shipping companies typically pay a flat fee to reserve space through the canal, but a daily auction allows shipowners to bid to skip the line. Supply prices typically rise during times of high demand.
Shipping restrictions on the canal could worsen further, and El Niño is expected to peak later this year. The natural weather pattern, which is driving global changes in winds, barometric pressure and precipitation patterns, is forecast to be the strongest in four decades.
The 82 km long canal, connecting the Caribbean Sea to the Pacific Ocean, uses fresh water from the rivers flowing into Lake Gatun to operate a system of locks. In September, officials said the watershed had received less rainfall than predicted.
The canal’s locks act like elevators, each filling with water and lifting ships 26 meters (85 ft) from sea level to Lake Gatun and then back to sea level on the other side.
If lake levels are no longer safe for the largest vessels to pass through, the Panama Canal Authority imposes restrictions for safety and water conservation.
In 2023, water levels in the lakes feeding the canal were so low that authorities cut daily sailings from 38 to 22. The restrictions have led to shipping bottlenecks and forced companies to seek alternative routes.
El Niño has had a major impact on Central America and northern South America, where nine countries experienced their hottest June to August period on record this year.
According to an Agence France-Presse analysis of weather data from Europe’s Copernicus programme, 52 countries on all continents broke their seasonal temperature records during this period.
Extreme heat has taken many forms, from unprecedented heatwaves in Europe to devastating drought in Sudan and toxic smoke in Indonesia.
More than a third of the people who experienced the hottest northern summer months on record lived in Africa, especially in the Sahel and areas south of it.
Eighteen African countries broke their seasonal records between June and August, from Mauritania and Sierra Leone in the west to Eritrea and Ethiopia in the east.
