Climate-induced drought in Central America is diverting ships from Panama to the Suez Canal

The Panama Canal’s water shortage spells a boon for Egypt’s Suez Canal: Climate-driven water scarcity in Central America has driven the Panama Canal Authority to mandate that shipping vessels decrease their payloads, driving freight ship traffic to Egypt’s Suez Canal, Asharq Business writes. The operators of the 64-km-long Panama Canal — where the Pacific and Atlantic oceans connect and through which c.5% of the world’s trade passes — unload some 200 mn liters of fresh water whenever any ship passes through the channel to enable it to pass through the Canal’s locks, Deutsche Welle writes. However, the water shortage has forced the Panama Canal Authority to restrict ships that are larger than a certain size from transiting through the canal.

What does this mean for the Suez Canal? This development is expected to have a “significantly positive impact” on Suez Canal traffic, President of the Suez Canal Authority Osama Rabea told Asharq Business. Traffic through the Suez Canal is expected to grow 10% y-o-y in 2023, raking in some USD 8.8 bn, according to Rabea. Almost 12% of global trade flows through Egypt’s Suez Canal.