How the Climate Crisis at the Panama Canal Continues to Threaten the Supply Chain

Panama Canal drought conditions continue to cause supply chain disruptions as the Panama Canal Authority (PCA) has cut the number of daily reservation slots from 32 to 22 in November. By February 1, 2024, slots will be dropped to 18.

Wait times will continue to rise for ships without reservations if ships don’t reroute. The average wait time for ships without a reservation for Atlantic to Pacific southbound transits was 2.1 days in the beginning of November. As of this week, the average wait time has increased to 11.4 days. The maximum wait time hit 22.8 days last Sunday.

Northbound passage wait time also rose in November, coinciding with reservation cuts. Average wait time for northbound transits was nine days this past Wednesday. The maximum wait time on Wednesday was 24.9 days.

Low water levels are the route cause of the issue in Panama, affected by unprecedented drought conditions. Not enough rain has fallen to fill the lakes, rivers and brooks that feed into the Gatun Lake which provides water to fill the locks. After experiencing the driest October since 1950, the Canal authorities announced in October that a gradual decrease in daily transit allowances would be necessary. The cuts will bottom out February 1.

The lack of rainfall has dried up a key lake at the Panama Canal, affecting shipments through one of the world’s most important waterways. Some ships are forced to take a longer journey through South America. The Suez Canal, another route for vessels sailing between the US and Asia, is handling some of the congestion.

The Panama Canal is a short cut between the Atlantic and Pacific oceans and accounts for 40 percent of US container traffic. In normal conditions, between 38 to 40 ships can pass through the canal each day.

“We’ve been monitoring this situation since this summer when the Canal authorities started limiting the number of ships passing through,” said Tom Peacock, President of Worldwide Logistics Group. “We’ve been working with our customers on contingency planning in the event that the situation continues to deteriorate,” he added.

Many carriers have imposed a Panama Canal surcharge (PCC), as the drought worsens and impacts passage through the waterway.

“With Chinese New Year approaching and demands for cargo increasing, we are recommending earlier than normal bookings to our customers,” said Peter Perez, vice President of Sales for Worldwide Logistics Group.

Please contact your Worldwide Logistics Group representative for assistance.