Panama Canal to Further Reduce Daily Transits if Drought Continues

The Panama Canal could further reduce the maximum number of authorized daily vessel transits if this year's drought continues, the waterway's administrator said on Tuesday.

A backlog of ships is waiting to pass through the trans-oceanic canal, which handles an estimated 5% of world trade. It began restricting vessel draft and daily passage authorizations this year to conserve water.

Many vessels have had to lighten cargoes before passing, and freight costs have risen ahead of the Christmas shopping season.

Up to 32 ships are currently authorized to transit every day, down from 36 ships in normal conditions. Maximum vessel draft has been limited to 44 feet, down from 50 feet.

To ease the bottleneck, the canal recently changed its reservation system to allow more non-booked vessels to pass and to prioritize ships waiting the longest.

As of Tuesday, 116 vessels were waiting to pass in Panama, down from over 160 in early August. The maximum wait time was 14 days, down from 21 days a month ago, according to official data.

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.

Passage restrictions are not planned for this month. But in its budget for the fiscal year beginning October, the canal foresees a possible cut to 30-31 daily transits, he added.

The El Niño weather 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
Water levels at the Gatun Lake, which feeds the waterway, were at 24.2 meters (79.7 feet) last week, down from 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.

Panama eventually must modify 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. The proposed project, which would require a change in legislation and must be submitted to congress, could be open for bids next year.

Experts have warned about maritime trade disruptions ahead of what is shaping up to be an even drier period next year. They say 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.

(Reuters - Reporting by Marianna Parraga, Editing by Gary McWilliams, Timothy Gardner and David Gregorio)