Drought Continues to Cripple Panama Canal

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Because the Panama Canal has been partially shut by drought, the country will try to expand the areas where it gets water. According to The New York Times, the country may build a canal to move more water into the canal. This would create a new reservoir from which water could be taken when drought undermined its ability to handle huge ships at the rate it did up until recently.

Even if the plan works, it may not be an entire solution. The drought is severe enough that a new supply may not offset it. Drought has hurt other parts of the world, including New Mexico.

The FT reports that liquified gas and grain ships have decided to use the Panama Canal less if they use it. The ability of the canal to handle the largest ships has dropped by nearly half. Many of the owners of these ships have decided not to use them in the future. “People have made their minds up that you might as well factor in the long time [and] just stay away from [the canal] if you can afford it,” said Jérémie Katz, an LNG broker at shipbroker Braemar, according to the FT.

The plan companies with these large ships have begun to use is very similar to those who used to transit the Suez Canal. Rockets and other attacks from Houthi militia have made them decide to send cargo on its way to Asia south to a route near the Cape of Good Hope. This adds more than a week to the time required for the delivery dates. The cost of extra fuel to operate the tankers can be several hundred thousand dollars more.

The cargo shipping times may have been permanently lengthened because of climate change and geopolitical issues.