Panama Canal Transit Restrictions and Water Deficits
The Panama Canal Authority announced that daily vessel transits will drop from the current 36 ships to 34 ships starting September 4, and further decline to 32 ships on September 15, according to the Panama Canal Authority, the Financial Times, and Reuters. The reversal comes just three months after the authority stated in May that no transit limits would be necessary this year, as water levels dropped much faster than anticipated.
Connecting the Atlantic and Pacific oceans, the canal handles over 3% of global maritime trade. Operating the waterway requires filling water chambers to lift and lower ships. Rainfall across the canal watershed plummeted 34% below historical averages between May and August, worsening the water deficit.
Surging Shipping Costs and Geopolitical Pressures
With commercial traffic seeking alternative routes, Panama Canal transit fees hit a record high this month, averaging approximately 110만달러, or about 15억원—more than 16 times higher than the average cost during the same period last year, according to Reuters and the Financial Times.
To manage the bottleneck, the canal authority will split the booking auction into four groups based on cargo and vessel type starting September 4. For the larger Neo-Panamax locks, priority for reservation slots will go to container vessels with the highest cargo capacity. Ricaurte Vásquez, the administrator of the Panama Canal Authority, warned that the current El Niño could persist much longer than usual, potentially forcing additional limits on cargo loads and overall transit capacity similar to the severe droughts of 2023 and 2024.
El Niño Impacts Across Central and South America
The broader El Niño weather pattern—characterized by warmer-than-normal sea surface temperatures in the central and eastern equatorial Pacific—is simultaneously triggering droughts in Central America and heavy rainfall in parts of South America. In Honduras, the government issued drought alerts across 234 of the country’s 298 municipalities, placing 75 areas under a red alert. Honduras plans to construct reservoirs and provide food assistance as the drought threatens to persist through April, local media reported.
Conversely, Peru is grappling with torrential rains and landslides that have flooded homes and schools in Lima and closed sections of the Inca Trail leading to Machu Picchu. The Peruvian government declared a state of emergency across 796 districts in 22 regions to prepare for flood and mudslide risks. Meanwhile, Ecuador experienced unusual coastal downpours, though local weather authorities noted that these rains are not yet directly tied to El Niño, with its main impacts expected later in the year or early next year, according to regional reports.
Frequently Asked Questions
Why is the Panama Canal reducing daily ship transits?
The Panama Canal Authority is cutting daily transits from 36 down to 32 ships because severe drought linked to a strengthening El Niño reduced watershed rainfall by 34% below historical averages between May and August.
How much have Panama Canal transit fees increased?
Average transit costs reached approximately 110만달러 this month, representing a more than 16-fold increase compared to the same period last year, driven by both water-related capacity cuts and surging demand following the closure of the Strait of Hormuz.
What areas of South and Central America are affected by El Niño?
Honduras has issued drought alerts across 234 municipalities, while Peru has declared a state of emergency in 22 regions due to heavy rains, flooding, and landslides.
What are your thoughts on how global supply chains are handling these climate and geopolitical pressures? Join the discussion by leaving a comment below, explore our related coverage on international trade routes, or subscribe to our newsletter for weekly updates.
Related reading