Historic Drought and Rising Sea Temperatures Disrupt Panama Canal Shipping, According to Reuters

By Lisa Baertlein and Marianna Parraga

LOS ANGELES/HOUSTON – Before the Ever Max, a cargo ship loaded with items like lava lamps, sofas, Halloween costumes, and artificial Christmas trees, could embark on its inaugural journey through the Panama Canal this month, it faced the necessity to offload hundreds of containers due to a historic drought.

The vessel, owned by Taiwanese shipping firm Evergreen Marine, missed the opportunity on August 1 to set a record for carrying the most containers through the crucial waterway that links the Pacific and Atlantic Oceans. The Panama Canal Authority has implemented restrictions on maximum ship weights and the number of vessels allowed to transit daily in an effort to conserve water. As climate change continues to impact weather patterns, maritime transportation experts express concerns that these issues may become increasingly common, especially as the region’s rainfall deficits highlight the risks to the shipping industry, which is responsible for moving around 80% of global trade.

To address these challenges, ship owners are left with a few options: they can carry less cargo, opt for alternative routes that could significantly increase travel distance, or deal with delays caused by congestion—recently affecting as many as 160 vessels and causing shipping delays of up to 21 days.

These restrictions are already leading to significant increases in shipping costs between China and the U.S., with spot prices rising by as much as 36%, exacerbated by rapidly increasing sea temperatures. Drew Lerner, a senior meteorologist, notes, "You have to wave a caution flag because the temperatures are so far above normal."

Canal operators are tasked with navigating the complications of maritime trade while preparing for potentially even more severe conditions in the future. In 2022, over 14,000 ships passed through the canal, with container ships being the most frequent users—accounting for over 40% of consumer goods transported between Northeast Asia and the U.S. East Coast.

Vessels bound for the U.S. caught in the current bottlenecks have carried a diverse range of products, including dolls, auto parts, solar panels, water treatment equipment, and diabetes testing supplies. Restrictions introduced earlier this year impacted approximately 170 countries and all kinds of goods, from U.S. soybeans and liquefied natural gas to fresh cherries from Chile and beef from Brazil. Bulk carriers transporting commodities and tankers carrying oil and chemicals are also encountering similar challenges, with some energy companies redirecting their coal and liquefied natural gas shipments to the Suez Canal.

The drought affecting Panama is partly due to El Niño, a climate pattern linked to warmer ocean temperatures in the tropical Pacific. Rainfall data indicates that the canal region is experiencing one of the two driest years in its recorded history, with measurements falling 30-50% below normal levels. Water levels in Gatun Lake, the main reservoir that provides water for the canal’s locks, have remained below average despite some rainfall this season.

Experts warn that an early onset of Panama’s dry season, along with heightened evaporation rates due to warmer temperatures, could lead to record-low water levels by early 2024. Steven Paton, a researcher monitoring rainfall patterns, described the situation as "the perfect storm of events." He noted that the frequency of major El Niño events has increased significantly over the past 25 years, making it difficult for the canal to accommodate larger vessels.

In response to these challenges, canal operators have lowered weight limits for ships to cope with reduced water depth, posing difficulties for large vessels like the Ever Max. Although the ship was designed to carry over 8,650 cargo boxes, it arrived at the canal exceeding the limit, carrying the equivalent of only 7,373 containers. The vessel ultimately offloaded around 700 containers onto trains to continue its journey to the U.S. East Coast.

Additionally, the number of daily vessel crossings has decreased from about 36 to 32, as each crossing consumes roughly 50 million gallons of water, of which only a portion can be recycled.

Shipping executives are bracing for potential further reductions in crossings, recalling how a less severe drought in 2020 had already led to a reduction to just 27 crossings per day. Brian Bourke, a logistics executive, emphasizes the importance of being aware of climate change-related disruptions, stating, "The Panama Canal is just the latest example."