The Panama Canal is an engineering marvel that has connected two oceans and served as a vital artery for international trade for over a century. However, it faces an unprecedented challenge due to the drought that affects the region. In this blog, we will explore how the drought in Panama has led the Panama Canal to take drastic measures by significantly reducing booking slot capacity.
In October 2023, Panama experienced its driest month in 73 years, and the Panama Canal was forced to take drastic actions. The Canal, which normally has a capacity for 38 to 40 daily transits, has been operating with 32 daily transits since July 30 and was scheduled to reduce to 30 assigned slots on November 1. However, due to the lack of rainfall and projections of a 38% reduction in rainfall for the rest of the year, the Panama Canal Authority (ACP) has announced more drastic cuts. The ACP will reduce the number of guaranteed booking slots to just 18 by February next year.
The reductions will be progressive. From November 3, 2023, to November 6, 2023, the number of booking slots will be reduced to 25, and from November 7 to November 30, 2023, to 24. Additionally, from December 1 to December 31, 2023, will be further reduced to 22, and from January 1, 2024, to January 31, 2024, to 20. For booking dates beginning February 1, 2024, and until further notice, will be reduced to 18 per day.
This reduction in booking slots affects container lines that need to ensure the transit date to meet fixed schedules. The cost of booking slots skyrocketed to record highs after the cuts were announced mid-year. Larger vessels have already been forced to sail with smaller loads or offload containers for transshipment across Panama, an option not available to gas carriers and bulkers.
In conclusion, the Panama Canal is facing an extraordinary challenge due to the unprecedented drought in the region. These drastic reductions in booking slot capacity serve as a reminder of the interconnectedness between the environment and the global economy. As climate change continues to disrupt weather patterns, the Panama Canal is on the front lines of the consequences.
The canal’s ability to adapt and manage this crisis will have a significant impact on international trade in the coming months. This situation is a reminder of the importance of sustainability and long-term planning in an ever-changing world.