Panama Canal Increasing Ship Traffic After Drought

The Panama Canal is lifting ship traffic restrictions as water levels normalize following severe drought.

Bloomberg’s Michael D. McDonald reports the Panama Canal is lifting restrictions that caused a global shipping bottleneck as water levels normalize after a severe drought.

“The Panama Canal Authority increased the draft in the waterway to a maximum 50 feet and will allow 36 vessels a day to transit after recent rains lifted water levels at an artificial lake that forms part of the canal system,” administrator Ricaurte Vasquez announced. According to McDonald’s reporting, the agency expects rains to continue through November, further lifting water levels.

“About 30 to 32 vessels are currently transiting the waterway, below pre-drought capacity,” says McDonald. “The canal restricted daily transits to as few as 24 at the height of the drought.” Vasquez said it’ll take about five to six months for shippers to return in full. Rainfall is expected to lift Lake Gatun’s water levels to 88 feet by November from current levels of around 85.8 feet.

McDonald reported that last year’s El Niño caused a significant drop in rainfall and forced the canal to implement daily transit restrictions for the first time in history. The authority even held auctions in which shippers could bid for transit slots. Some shippers, especially time-sensitive vessels carrying liquefied natural gas and liquefied petroleum gas, opted for alternative routes.

Larger cargo volumes have helped conserve water

Recently vessels have been arriving at the canal with larger cargo volumes, allowing the authority to cut water usage while keeping tonnage stable, according to Vasquez. He said the authority will work with shippers to ensure ships arrive at the canal with the maximum cargo possible.”

“The agency may need to implement seasonal draft restrictions during the 2025 dry season, which is typically in the first half of the year, but will seek to avoid using daily transit restrictions,” Vasquez said. “The canal is studying the possibility of opening up long-term reservation slots for more time-sensitive users such as LNG and LPG shippers to guarantee greater certainty and help vessels reach destinations without delay.” He said the authority will meet with LNG and LPG market participants in September to discuss the proposal.

Canal planning reservoir expansion to combat drought

Reuters’ Marianna Parraga reported earlier this week that “the Panama Canal expects to be ready to combat a possible new drought, which could hit the world’s second-largest waterway within four years, by accommodating larger vessels, securing dedicated passage for some ships and expanding its water reservoirs’ capacity, as shared by Vasquez.”

“Preparations for a $2-billion expansion of one of its water reservoirs, following approval by Panama’s Supreme Court, are expected to take 18 to 24 months, including engineering studies,” Vasquez said. Parraga reported that the canal uses fresh water from rain-fed lakes to operate its locks, which separate the salt waters of the Atlantic and Pacific oceans.

“The reservoir expansion, coupled with slot changes to encourage larger vessels to use the waterway and dedicated passage for some ships, including carriers of liquefied natural gas, liquefied petroleum gas and refrigerated cargo, would allow the canal to handle the same tonnage while avoiding delays under a water-saving system,” said Parraga.

EDITOR’S TAKE:

Transportation is a key competitive element of moving agricultural goods around the world. The Panama Canal is a significant factor in determining transportation costs for many ag commodities. We reported previously that the drought and slowdown at the Panama Canal was having a significant impact on transportation cost and the amount of time it takes to move those products to their final destination. Now, with removing restrictions and planning for future reservoir expansion, the canal is once again operating close to capacity. This is very good news with new crops soon to be harvested in the U.S. The lower transportation cost will eventually be reflected back to our farmers/ranchers, thus, helping them retain a little more margin on their goods. Make sure to keep your inventory up-to-date on AgTruckTrader.com®. You never know when those farmers/ranchers will get that urge to purchase or lease that new truck or SUV from a CAD member. It might as well be you!