Prolong drought caused traffic jam in the Panama Canal

More than 200 ships are stuck in Panama Canal

For a long time, Panama Canal has been suffering from a prolonged drought. The authorities limited the number of ship crossings and even closed the Canal temporarily. However, drought, accompanied by water conservation efforts, led to a backlog of ships trying to pass through one of the most vital shipping lanes in the world, Marine Insight said.

Per the Wall Street Journal, over 200 ships on both sides of the Canal are waiting to pass through. The Panama Canal Authority issued an advisory to shippers mentioning that it is reducing the ship crossings to 32 a day, down from an average of 36 during normal conditions.

Some vessels on the strategic waterway are rerouting traffic to avoid the backlog, and most stranded ships are bulk cargo ships or gas carriers.

Tim Hansen, chief commercial officer at Dorian LPG, which operates over 20 large gas carriers, stated, ‘The delays are changing by the day. Once you decide to go, there is no point to return or deviate so you can get stuck.’

The rainy season has come late to the region, and as the canal needs three times as much water as New York City each day, it depends almost entirely on rainfall for replenishment.

“If there isn’t enough rain, ship transits are cut and those that cross pay hefty premiums that boost transport costs for cargo owners such as American oil and gas exporters and Asian importers,” Wall Street Journal reported.

These unwanted developments could add pressure to consumer goods prices.

Panama Canal’s administrator, Ricaurte Vasquez Morales, said that the restrictions could remain for the rest of the year, adding it could lead to a loss of $200 million in revenue.

Per the Wallstreet Journal, Panama has contacted the U.S. Army Corp of Engineers, the agency that constructed the canal in the early 1900s. It has kept $2 billion for the next decade “to divert up to four rivers into the waterway, in addition to the three that already feed it.”

“We had two ships that couldn’t book, and it was quite expensive,” Lars Oestergaard Nielsen, A.P. Moller-Maersk’s head of customer delivery in the Americas, told the Journal. “We went to an auction and paid $900,000 on top of the $400,000 normal toll fee for each ship to cross.”

Vessels usually pass through the canal at a 50 ft draft, which has been reduced to 44 ft. Due to lower water depths, massive ships must empty some containers before passing through.