Climate change will cost the Panama Canal USD bns annually

Preserving the Panama Canal’s capacity to accommodate vessels amid a long lasting drought could take years and cost bns of USD, Bloomberg reports. The canal is facing unprecedented water shortages at levels 1.8m below average, limiting the number of vessels able to cross each day. Pre-drought capacity permitted 38 ships per day, while authorities have now capped it at 24, with the number expected to drop further as the dry season approaches.\

Bigger business for Egypt’s Suez Canal? Climate-driven water scarcity in Central America drove the Panama Canal Authority to mandate that shipping vessels decrease their payloads last May, driving freight ship traffic to Egypt’s Suez Canal.

There’s no quick fix: The canal authorities are considering using an artificial lake to pump water into the canal or boosting rainfall through cloud seeding but both options would take years to implement, Bloomberg writes. In the meantime, the canal will use water from a secondary reservoir, Lake Alajuela, until rain picks up in May. Panama is exploring damming up the Indio River as a long-term option — a costly and controversial project that faces local opposition from farmers.

What does this mean for global trade? The canal is responsible for roughly USD 270 bn a year in global trade, and restrictions put in place since August 2023 have impacted the 170 countries that use the canal to transport key goods. The Evergreen Marine ship — which was scheduled to set a record for carrying the most containers through the Panama Canal — was forced to unload thousands of containers after the canal authority reduced maximum ship weights.