The uncertain future of the Panama Canal and international trade is being heavily influenced by the impact of climate change.
Steven Paton sits in his office on the Pacific Ocean, overlooking the entrance to the Panama Canal. In the distance, the tall buildings of the country’s capital can be seen on the horizon, while a growing line of tankers forms in the bay.
For 33 years, this person has worked at the Smithsonian Tropical Research Institute, where they observe the climate of the region. They have witnessed firsthand how the familiar weather patterns have shifted, challenging established beliefs and raising concerns about the future sustainability of a crucial trade route.
In the past year, Paton has observed a decrease in rainfall in the region, resulting in slower passage through the Panama Canal and an increase in the number of tankers waiting in the bay. As the situation is expected to worsen, experts warn that a restricted Panama Canal could have global implications.
The canal, which was completed in 1914, greatly improved international shipping by connecting the Atlantic and Pacific Oceans. This eliminated the need for ships to navigate around the hazardous southern end of South America, resulting in a significantly shorter journey of over 13,000km.
In 2022, over 14,000 vessels sailed through the canal, carrying fuel, grain, minerals, and products from factories in east Asia to customers in New York and other areas. The canal handles more than 40% of consumer goods traded between north-east Asia and the east coast of the US.
Ships, some as long as 350 metres, travel through a narrow waterway and are lifted over 26 metres above sea level into Lake Gatun via a system of locks. Once on the opposite side of the canal, the ships go through a similar process in reverse, descending to sea level through locks before exiting on the other side of the continent.
The mechanism for locking utilizes water from Lake Gatun and a nearby reservoir. Each passing ship requires 200 million liters of water, the majority of which is released into the ocean.
The sources also supply water to over half of Panama’s population of 4.3 million, causing administrators to navigate the competing needs of global shipping and local residents.
For many years, this has seldom been an issue. Panama is among the most moist nations on the planet and the canal and its nearby lakes have been fortunate enough to have plenty of water. However, in 2023, a shortage of rainfall, worsened by the El Niño weather event, caused the water levels in Lake Gatun to decrease.
The lake is currently experiencing a water deficit of 3 billion liters per day due to the demands of the canal and the surrounding community.
The water level at Lake Gatun is currently nearing its lowest point ever recorded during a rainy season. As a result, the Panama Canal authority, which oversees the waterway, has had to limit the number of vessels allowed to pass through.
Under regular circumstances, the Panama Canal has the ability to accommodate 36 ships per day. However, due to decreasing water levels, the canal authority has decreased this number to 22. By February, it will only be able to handle 18 ships per day.
Nitin Chopra, a former tanker captain and current senior marine risk consultant at Allianz Commercial Asia, states that the effects on shipping have never been as significant.
People who depend on this pathway have limited choices, they may have to wait for weeks to be given permission to pass through the canal, pay a large sum of money to skip ahead in line, or take the alternative route which could significantly lengthen their trip.
Each of these options carries a significant financial burden for traders, and some operators have cautioned that because of the delay, certain goods being shipped from China may not be accessible to Christmas shoppers on the east coast of the United States.
Due to increased assaults on the heavily trafficked trade route in the Red Sea, numerous businesses are opting to avoid using the Suez Canal entirely. This means that any limitations at the Panama Canal will only exacerbate the strain on worldwide supply chains, coinciding with efforts by governments to control inflation.
Chopra predicts that there will be a significant rise in the price of goods over time, and consumers will ultimately bear the cost.
Traders face more than just financial risks. With an increasing number of ships waiting to enter the canal, shipping experts are cautioning against the heightened potential for a major accident to occur.
According to Chopra, certain boats are currently facing difficulties finding a safe place to anchor as they wait for up to two weeks on either side of the canal. The limited space available at sea is also becoming a concern.
An anonymous tanker captain told the Guardian that the anchorage at the canal entrances has become overly congested, resulting in numerous close calls.
A different leader of a vessel transporting natural gas stated that due to the rise in traffic, certain ships have had to remain anchored for up to 25 days. This puts them in a potentially hazardous situation, as they are in close proximity to other ships.
“Ships are crashing into each other,” stated Chopra. “If we encounter severe weather conditions, there could be significant consequences.”
Despite the current state of the Panama Canal being unfavorable, analysts predict that the circumstances will deteriorate further in the coming year.
Steven Paton predicts that Lake Gatun may reach its lowest level ever recorded between March and April of next year. This is due to the fact that during significant El Niño occurrences, Panama’s dry season tends to start earlier than usual, resulting in even less rainfall and a potential deficit.
The Panama Canal authority has confirmed this forecast aligns with their own predictions and they may contemplate implementing additional limitations on ships.
According to the authority, October of this year experienced the driest conditions since 1950, despite being in the middle of its rainy season. There was a 41% decrease in rainfall compared to the typical amount.
In October, the authorities stated that the Canal and the nation are preparing for the upcoming dry season, which poses a challenge due to limited water reserves. These reserves must be enough to provide water to over 50% of the population and also sustain the operations of the canal.
The concern for the organization responsible for the canal, international merchants, and the numerous individuals dependent on Lake Gatun’s resources is whether the current lack of water is a temporary issue due to El Niño, or a sign of the potential consequences of climate change.
With more than 100 years of precipitation records, Paton is well-suited to provide an answer to this question.
“He says that he is starting to think that the patterns we have become familiar with in the past 30 years are no longer helpful in forecasting the future.”
In the past, there has been a lack of rainfall approximately every 20 years because of significant El Niño occurrences. However, in the past 26 years, there have already been three instances of significant rainfall shortages. This suggests that there may be a shift in our typical rainfall patterns.
However, Paton warns against attributing the shifting patterns solely to the issue of climate change.
He states that the rise in frequency aligns with predictions from climate change models, but these models have not definitively confirmed this.
According to statistical data, the current situation is unprecedented in the past 100 years, according to the speaker.
According to Paton, if the pattern of significant lack of rainfall persists, it will become more challenging for the canal to function at its typical level.
The organization in charge of the canal has stated that they are taking action to implement procedures, utilize new technologies, and make long-term investments in order to reduce any negative effects and protect the canal’s functionality.
It is stated that the present circumstance is without precedent and it was impossible to foresee the exact timing and severity of the water shortage we are currently facing.
However, although the authority claims it could not have foreseen the crisis, others were able to predict it.
For many years, specialists have cautioned that the shifting climate will have extensive impacts on worldwide supply chains and their governing systems.
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 unspoken suggestion was that the environment had been controlled. However, with the increasing sea levels and soaring temperatures, these assumptions are collapsing one after another.