Global transportation bottlenecks that have surged since the Covid-19 pandemic have affected international trade. Clear evidence of this can be seen in the current situation with large numbers of vessels queuing up to enter the Panama Canal.
This week some 101 vessels were awaiting clearance to make the 64km journey through the canal, six units more than the average recorded so far this year according to Canal sources quoted by Bloomberg.
The reason is that the canal is running out of water.
Here’s why the canal is drying up and what it could mean for the world’s maritime commerce.
The canal is a 65km-passage which about 6 per cent of all global shipping trade passes through.
It connects the Atlantic and Pacific Oceans and its construction significantly reduced the journey for ships travelling between the oceans.
More than 14,000 ships crossed the canal in 2022.
Panama is one of the world’s wettest countries but an El Niño pattern is contributing to a prolonged drought.
Rainfall is about 30 to 50 per cent below normal and the area around the canal is experiencing one of the two driest years in the country’s 143 years of keeping records, according to data from the Smithsonian Tropical Research Institute (STRI).
The Gatun Lake is the principal reservoir that floats ships through the canal.
Water levels in the rainfall-fed lake have remained below normal despite the current “wet season”.
Carriers have been forced to offload cargo or consider alternative routes to comply with restrictions imposed by the Panama Canal Authority.
The government agency has reduced maximum ship weights and daily ship crossings in a bid to conserve the canal’s water.
“Each time a ship goes through there, it uses up about 80 Olympic-sized swimming pools of water and that all comes out of the lake,” maritime logistics expert from Deakin University Peter Van Duijn told ABC News.
Ship owners have the options of carrying less cargo, adding thousands of kilometres to their trips or grappling with queues that earlier this month backed up 160 vessels and delayed some ships by as much as 21 days.
Panama Canal Authority recently opened two more passage slots per day for ships that don’t have have priority to pass, as container ships do, and this week the backlog had decreased to 115 ships.
The Panama Canal expects to maintain restrictions for at least another 10 months.
The extension of the restrictions would give the canal room for preserving water before the next rainy season arrives, but could create a larger bottleneck of ships if they do not reserve ahead of passage.
“We are currently seeing an increase in arrivals,” the canal’s deputy administrator Ilya Espino said on Thursday.
“It is peak season as December is approaching, so merchandise for Christmas is moving quickly.”
The frequency of major El Niño drying patterns has risen significantly during the last 25 years of the canal’s 109-year history.
Mr Paton said that if that continues, it will be increasingly difficult for the canal to guarantee that the largest ships are going to be able to get through.
The Panama canal saw record amounts of cargo passing through its locks in the most recent fiscal year as trade restrictions between China and the US eased. China reopened grains, pork, and liquefied natural gas market to US sales.
Moreover, a US$ 5.25 billion expansion inaugurated in 2016 allowed larger vessels from Asia to reach the US East Coast quicker, avoiding lingering congestion at the ports of California.
US imports of Asian goods arriving on the West Coast fell 3.4% in the first quarter compared to a year earlier, while the number of goods entering the East Coast rose 12.9%, according to freight analysts at Xeneta. Shipments along the coast of the Gulf of Mexico rose 31.1%.
Anyhow the ripple effects of Chinese lockdowns are starting to be felt. After the flow of vessels through the canal increased by 18% in April compared to the same month in the previous year, the channel is now seeing a delayed effect of Beijing’s “covid zero” policy, said Panama Canal Authority head Ricaurte Vasquez.
“Although the pace may differ and the origin and destination may shift slightly, once the lockdown is normalized, we expect to see orders flowing and products being shipped,” he said
Vasquez said that the situation should stabilize once Chinese factories learn to live with Covid. Transport can adapt as long as the resumption is gradual, especially because the market is still “very strong in demand for ship availability.”
Sources: MercoPress, Australian Broadcasting Corporation.