SUPPLY CHAINSWhat’s Causing the Panama Canal Logjam
Low water levels have, the result of prolonged drought conditions, led to a traffic jam at one of the world’s busiest maritime passages. The Panama Canal Authority has capped the number of ships that cross the canal each day, and has restricted their maximum weight and draft, or how deep below the waterline a ship sits. The bottleneck demonstrates how accelerating climate change is threatening global supply chains.
As of September 28, eighty-nine vessels are waiting to traverse the Panama Canal, which handles hundreds of billions of dollars in global trade each year. The traffic jam has forced ships to endure dayslong wait times and is caused by prolonged drought conditions that have resulted in historically low water levels in the canal.
The canal relies primarily on rainwater from Gatún Lake, a nearby artificial reservoir, to feed its lock system, which uses at least fifty million gallons of water—enough to fill almost seventy-six Olympic-size swimming pools—to float each ship through the canal. Without enough water, the canal can’t operate.
The Panama Canal Authority (ACP), the government agency that manages the waterway, began imposing water-saving restrictions earlier this year. In addition to capping the number of ships that cross the canal each day, the ACP has restricted their maximum weight and draft, or how deep below the waterline a ship sits. Officials recently extended the measures to last at least ten more months, through late 2024.
What does the backlog mean for global supply chains?
The fifty-one-mile Panama Canal connects the Atlantic and Pacific Oceans and is one of the world’s busiest maritime shipping passageways. Since opening in 1914, the canal has grown to handle about 6 percent of global trade, dramatically reducing the time and cost of shipping by enabling vessels to avoid a lengthy trip around Cape Horn, the southernmost tip of South America. Gatún Lake also supplies drinking water to half the country’s population.
Some thirteen to fourteen thousand ships pass through the canal each year, generating upward of $2 billion in revenue. The United States is the canal’s largest user; 40 percent of all U.S. container ships traverse it annually, carrying $270 billion in cargo. Other major users include Chile, China, Japan, and South Korea.
