A severe drought is affecting the Panama Canal, a critical international shipping artery. The lack of abundant rainfall has led to lower water levels, and the Panama Canal Authority has imposed restrictions on vessel weights and daily traffic.
The Panama Canal Authority has reduced the number of vessels that can pass through the canal per day from 36 to 32; media outlets are reporting wait times have reached up to three weeks and some are reporting a backlog of over 200 ships.
“About 80% of our merchandise in trade is moved via vessel over the water,” said Janelle Griffith, the North American logistics adviser from Marsh told CNN. “So we actually should be concerned when we see those sorts of blockages. And, yes, it does have global ramifications … when you have a blockage in one part of the supply chain, the rest of the supply chain is automatically affected.”
The Panama Canal has long been crucial to global trade and international supply chains. According to Reuters, “More than 14,000 ships crossed the canal in 2022. Container ships are the most common users of the Panama Canal and transport more than 40% of consumer goods traded between Northeast Asia and the U.S. East Coast.”
If the drought continues, it could lead to further delays and disruptions in global supply chains. This could have a knock-on effect on businesses and consumers around the world, as prices for goods and services rise.
The Panama Canal Authority is monitoring the situation closely and is working to mitigate the impact of the drought. However, it is too early to say for sure how long the restrictions will be in place or what the long-term impact will be.
In the meantime, businesses and consumers should be prepared for the possibility of delays and higher prices. They may want to consider diversifying their supply chains and building up inventory to reduce their exposure to disruptions.
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