A severe drought is causing shipping delays in the Panama Canal that could wreak havoc across supply chains and increase consumer costs worldwide, MSN reports.
The Panama Canal is a vital shipping route that connects the Atlantic to the Pacific Ocean through a series of lock mechanisms. The mechanisms rely on fresh water from surrounding lakes, and a historic drought has depleted those water sources, causing massive delays, per MSN.
There are currently over 200 ships waiting to cross the canal, according to The Wall Street Journal, and some of them are shelling out multi-million dollar fees to jump the line, Bloomberg reports.
Forty percent of all U.S. container traffic passes through the route, according to Alix Partners.
The canal’s authorities have limited the number of ships that can pass through and lowered the canal’s draft restriction by 12 percent, drastically decreasing the amount of water that is pumped through it, per Alix.
Panama typically sees its dry season peak in April, but this year it extended through the summer, according to MSN. “Basically, with all that adds up to is that there’s less fresh water,” said MSN’s Matt Rivers. “The levels in the canal are much lower than where they need to be, and so as a result, canal authorities have less water to work with when they’re moving each one of these ships through.” (RELATED: Ship Stuck In Suez Canal Freed After Six Days)
A typical vessel traversing the canal uses 55 million gallons of water, per MSN. Authorities have had to restrict both the number of vessels allowed to use the canal and the amount of cargo those vessels can carry. This will likely lead to higher costs for consumers, according to MSN. “Generally speaking, they say let’s just pass those costs right along to the consumer,” Rivers said.
Panama’s water shortage is not the first time in recent memory that a shipping bottleneck has caused global delays. In 2022 an Evergreen container ship ran aground in the Chesapeake Bay, and in 2021 the same company caused a worldwide shipping disaster when a cargo ship became stuck in the Suez Canal.
