Worst drought in 70 years is causing container ships to load less when crossing the Panama Canal

Affected by global climate change and otherfactors, Panama is facing the worst drought in 70 years due to continuousdrought and little rainfall. The Panama Canal Authority has raised ship draftrestrictions for five consecutive times, which means that some container shipsmay need to reduce their cargo capacity by 40% to pass through, and internationallogistics costs will also increase accordingly. Affected by water shortages,the Panama Canal Authority has lowered the maximum draft of large ships forfive consecutive times, from the previous 15.24 meters to the current 13.41meters, and plans to lower it again in July.

Affected by factors such as global climatechange, Panama continues to suffer from drought and little rainfall, and isfacing the worst drought in 70 years. The Panama Canal Authority has raisedrestrictions on the draft of ships for five consecutive times, which means thatsome container ships may need to reduce their cargo capacity by 40% to passthrough, and international logistics costs have also increased.

According to the Institute of Meteorologyand Hydrology of Panama, since the beginning of this year, most countries inLatin America, including Panama, have experienced long periods of dry and hotweather, and many areas have suffered from severe drought. Rainfall in Panamais expected to remain low until the end of this year, and the drought willcontinue until 2024.

Affected by water shortages, the PanamaCanal Authority has lowered the maximum draft of large ships for fiveconsecutive times, from the previous 15.24 meters to the current 13.41 meters,and plans to lower it again in July. This means that the same weight of goodsneeds to be loaded on more freighters, which greatly increases logistics costs.

It is reported that several shippingcompanies relying on the Panama Canal route have increased the transportation priceof a single container by US$300 to US$500, or about RMB 2,150 to 3,590. Someeconomists pointed out that the increase in logistics costs will boost theprice of basic raw materials, and some countries have begun to evaluate andfind alternative routes.

Headquarters Reporter Rodriguez: The PanamaCanal is responsible for about 3% of the global trade volume. If the droughtcontinues, the mining and raw material markets will be affected.

Algot, an economist at the AmericanUniversity of Panama: Let’s take copper as an example. For example, if it isshipped from Chile or the Donoso area of Cologne Province inPanama and exported through the canal, its price will become more expensive.