No good news comes from the Panama Canal, which links the Pacific and Atlantic Oceans. The area suffers from months of drought caused by the El Niño climate phenomenon, which limits the capacity of the canal that has a series of locks feeding artificial lakes. Their water levels are now at their lowest.
40% of the world’s containers pass through the Panama Canal. Effective January 16, 2024, the authority governing the structure limited the number of passes to 24 per day, compared to an average of 32 in 2023 and 36-38 under normal conditions. The estimated losses, according to Italian news agency ANSA, are expected to be between $500 million and $700 million in 2024. There are concerns that the number of passes could drop to 18 if the situation does not improve.
In any case, the restrictions will last for a long time. Canal Administrator Ricaurte Vasquez told the AP that the limit of 24 daily passes will remain in place until April. A return to normal, which in any case will depend on precipitation, is not expected until 2025.
This is one of the major bottlenecks in global trade. The other is in Egypt, home to the Suez Canal, which connects the Red Sea and the Mediterranean Sea. It is a major transit route for trade between Asia and Europe. The problem there is different: the shelling by the Houthis. In both cases, the alternatives are long and expensive, involving sailing around South America and Africa respectively. Longer routes mean more time consuming and more costly.