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Changing climate casts a shadow over the future of the Panama Canal – and global trade

Changing climate casts a shadow over the future of the Panama Canal – and global trade



Facing a near unprecedented ‘rainfall deficit’, the Panama Canal has been forced to restrict the number of vessels passing through it
From his office perched on the edge of the Pacific Ocean, Steven Paton looks over the entrance to the Panama Canal; the high rises of the country’s capital resting upon the horizon behind him, and an increasingly long queue of tankers lining up in the bay.
For 33 years his job with the Smithsonian Tropical Research Institute monitoring the region’s climate has given him a front-row seat to how the weather’s familiar patterns have changed, upending axioms of old and calling into question the future viability of one of the most important trade routes in the world.
Over the last year, as the region has suffered through what Paton calls a “rainfall deficit”, passage through the Panama Canal has slowed and the queue of tankers waiting in the bay to pass through it has grown. Now, with warnings that the situation is set to get much worse, experts say that the effects of a restricted Panama Canal could be felt all over the world.
Connecting the Atlantic to the Pacific Ocean, the canal revolutionised global shipping when it opened in 1914, eliminating the need to travel around the dangerous southern tip of South America, shortening the trip by more than 13,000km.
In 2022, more than 14,000 ships traversed the canal, transporting fuel, grain, minerals and goods from the factories of east Asia to the consumers of New York and beyond. More than 40% of consumer goods traded between north-east Asia and the US east coast are transported through the canal.

To make the journey, ships – some up to 350 metres long – enter through a narrow waterway and rise more than 26 metres above sea level into the man-made Lake Gatun through a series of locks. On the other side of the canal, the process is reversed and the ships descend to sea level through another series of locks before exiting the canal on the other side of the continent.
The locking system relies on fresh water from Lake Gatun and another nearby reservoir to function. Every ship that passes through the canal uses 200m litres of water most of which then flows out into the sea.
The same sources also provide water for more than half of Panama’s 4.3 million inhabitants, forcing administrators to balance the demands of international shipping with the needs of the locals.

For decades, this has rarely been a problem. Panama is one of the wettest countries in the world and the canal and its surrounding lakes have been blessed with an abundance of water. However, in 2023 a rainfall deficit, exacerbated by the El Niño weather phenomenon, led to the water levels in Lake Gatun dropping.
The twin demands of the canal and the local population have left the lake facing a water deficit of 3bn litres a day.
Lake Gatun’s water level is now close to the lowest point ever recorded during a rainy season, forcing the Panama Canal authority who manages the waterway to restrict the number of vessels passing through.
In normal times, the Panama Canal has capacity to handle 36 ships a day. But as water has grown scarcer, the canal authority has reduced that number to 22. By February, it will be just 18.
The impact on shipping has never been “so severe”, says Nitin Chopra, a former tanker captain who is now senior marine risk consultant at Allianz Commercial Asia.
Those who rely on the route are left with no good options; they can wait up to weeks at a time to be allowed through the canal, pay up to $4m to jump ahead in the queue – or do what many shipping companies have been forced to and avoid the route entirely, adding days or weeks to their journey.
Every one of these choices comes at a serious financial cost to traders and some operators have warned that due to the delay, some goods that are transported from China may not be available to Christmas shoppers on the US east coast.
With attacks on the world’s busiest trade route in the Red Sea leading many companies to avoid the Suez Canal altogether, restrictions at the Panama Canal will only pile more pressure on global supply chains – just as governments around the world attempt to tame inflation.
“In the long run we’re looking at a big increase in the cost of commodities – it will be passed on to the consumer,” says Chopra.


And the risks to traders are not just financial. As the number of vessels waiting at the entrances to the canal grows, shipping experts are warning that the danger of a serious accident occurring is growing.
“Some boats will wait for up to two weeks, anchored at sea on both sides of the canal and they’re running out of space,” says Chopra. “It’s causing problems with vessels not being able to find a safe spot for anchoring.”
A tanker captain who spoke to the Guardian on the condition of anonymity said that the anchorage at the entrances to the canal has been too crowded and that he had seen “a lot of near misses”.
Another captain of a tanker carrying natural gas said that as the traffic has increased, some ships have been forced to wait at anchor for up to 25 days, in conditions that leave them in close proximity to other vessels.
“Vessels are colliding,” says Chopra. “If we experience any extreme weather, there could be a lot of consequential effects.”

As bad as the situation is at the Panama Canal, experts say the conditions are likely to only get worse next year.

“The expectation is that March to April next year could be the lowest level for Lake Gatun … on record”, says Steven Paton. “Panama’s dry season usually begins earlier than normal during major El Niño events so we’ll get the double whammy. We’ll come in with a deficit and then lose the rainfall earlier.”
The Panama Canal authority has said this prediction matches up with its own forecasts and that it might consider further restrictions on vessels.
Despite falling in the middle of its rainy season, October this year was the driest since 1950, with 41% less rainfall than usual, according to the authority.
“The Canal and the country face the challenge of the upcoming dry season with a minimum water reserve that must guarantee supply for more than 50% of the population and, at the same time, maintain the [canal] operations,” the authority said in October.

The question for the canal’s authority, global traders and the millions who rely on Lake Gatun’s reserves is whether the current water shortage is a one-off blip caused by El Niño, or a harbinger of the worst of what the changing climate could portend.

Armed with over a century of rainfall data, it’s a question that Paton is almost uniquely equipped to answer.
“I certainly am beginning to believe that the patterns we’ve come to know in the last 30 years are no longer a useful guide in helping us predict the future,” he says.
“Historically there has been a [rainfall] shortage on average once every 20 years due to major El Niño events. In the last 26 years this is the third major rainfall deficit. So it seems that something is changing our rainfall patterns.”
But Paton cautions against ascribing the changing patterns completely to the climate crisis.
“The increase in frequency is consistent with climate change models,” he says, “but the climate change models have not come out saying for sure.”
However, statistically what is going on now “has no analogue in the previous 100 years of data,” he adds.
Paton says that if the trend of “big rainfall deficits continues, it will become increasingly more difficult for the canal to operate at its usual capacity”.

The canal authority says it is “implementing operational and planning procedures, innovative technologies, and long-term investments to mitigate [the] impact and safeguard [the canal’s] operation”.
It says that the current situation is unprecedented and it “could not have predicted exactly when the water shortage would occur to the degree that we are experiencing now”.
But while the authority says it could not have predicted the crisis, others did.
For years, experts have warned that the changing climate will have far-reaching effects on global supply chains and the systems that govern them.
Structures like the Panama Canal are miracles of the modern world – solid totems of engineering wonder that were responsible for accelerating the economic boom of the 20th century, pulling up living standards across the globe and ushering in a revolution in technology, healthcare and consumer culture.
The tacit implication was that the natural world had been tamed. But as the seas rise and temperatures soar, those assumptions are falling like dominoes.