Panama Canal to further reduce daily transits if drought continues

The Panama Canal could further reduce the maximum number of vessel transits authorized per day if a drought that has hit the waterway this year continues, its administrator said on Tuesday.

The canal began restricting vessel draft and authorized daily passage earlier this year to conserve water, which has triggered a backlog of ships waiting to pass the key global trans-oceanic way, which handles an estimated 5 per cent of world trade.

The measures have forced many vessels to lighten cargoes before passing, and contributed to more expensive freight costs ahead of the approaching Christmas season.

Up to 32 ships are currently authorized to transit every day, from 36 ships in normal conditions. Vessel draft was also limited earlier this year to a maximum of 44 feet, from 50 feet.

In a move to ease the bottleneck of ships waiting, the canal has recently changed its reservation system to allow more non-booked vessels to pass and to give priority to the ships waiting the longest.

As of Tuesday, a total of 116 vessels were waiting to pass in Panama, compared with more than 160 in early August, according to official data. The maximum wait time had also reduced to 14 days, Vasquez said, from 21 days a month ago.

The head of the Panama Canal Authority, Ricaurte Vasquez, said the waterway would opt for reducing daily transits if needed, before planning any further cut to authorized vessel draft, which affects shippers the most.

"This (El Niño) phenomenon has been very severe this year. We have hot temperatures in the Pacific and the Atlantic simultaneously," Vasquez told journalists in a briefing. "We anticipate that in the upcoming months, in the absence of significant rain, we'll have to be prepared."

Prolonged drought

Vasquez said that even though this drought has not been the most severe Panama has ever seen, it could be very long.

Water levels at the Gatun Lake, which feeds the waterway, were at 24.2 meters (79.7 feet) last week, versus 26.6 meters for the month of September in recent years.

If the drought extends beyond 12 months, the canal could be forced to change its weather modeling, which could trigger additional restrictions, Vasquez added.

"We do not believe that the canal will suspend operations," he said.

In the long run, Panama needs modifications in the way water flows to the Gatun Lake to secure enough water for the canal, which uses 50 million gallons (190 million liters) of fresh water for each ship passing through.

"We are eagerly working with the authorities in order to make an arrangement that leads to the structure of additional reservoirs," Vasquez said, adding that the proposal, which would require a change in legislation, must be submitted to congress.

Experts have warned about maritime trade disruptions ahead of what is shaping up to be an even drier period next year. They argue that a potential early start to Panama's dry season and hotter-than-average temperatures could increase evaporation and result in near-record low water levels by April.