The Panama Canal has been facing a severe drought for the past few months, which has significantly impacted its operation and, as a result, global shipping.
Dr. Ricaurte Vásquez Morales, Panama Canal Authority Administrator, answered various questions on the matter during a webinar on September 13. Dr. Ricaurte Vásquez Morales explained the situation, gave an overview of the next steps, and answered questions from attendees.
What is the Panama Canal?
The Panama Canal is a strategically important artificial waterway that connects the Atlantic and Pacific Oceans. The construction of the Panama Canal was a monumental engineering achievement. It began under French leadership in the late 19th century. The canal was officially opened on August 15, 1914.
Since then, the Canal has established itself as a critical infrastructure that has shaped the movement of goods and vessels on a global scale and has had a profound impact on international trade and commerce.
In a remarkable display of activity, the canal experienced an impressive number of 14,239 transits during the fiscal year of 2022. Consequently, the crucial waterway witnessed a remarkable transfer of cargo tonnes in the year 2022, reaching an impressive grand total of 173,432,347.
The canal uses a series of locks to raise and lower ships as they pass through the waterway, compensating for the difference in water levels between the Atlantic and Pacific Oceans.
As a ship approaches the first set of locks, tugboats assist in guiding and manoeuvring the ship through the locks and narrow sections of the canal.
Water is either released from or pumped into the lock chamber to raise or lower the ship, depending on the direction of travel.
Once the water level in the chamber matches that of the next section of the canal, the gates at the other end of the chamber open, allowing the ship to continue its transit.
After passing through the Gatun Locks on the Atlantic side, ships enter Lake Gatun, an artificial lake created during the construction of the canal. This lake serves as a reservoir of freshwater to maintain the canal’s water levels.
After passing through the Gaillard Cut, ships descend via the Pedro Miguel Locks and then the Miraflores Locks on the Pacific side in a similar manner to how they ascended on the Atlantic side.
Once a ship exits the Miraflores Locks on the Pacific side, it continues through a series of exit channels to reach the open waters of the Pacific Ocean.
The entire transit process typically takes several hours, and the Panama Canal operates 24 hours a day, seven days a week, allowing ships of various sizes and types to make this vital journey.
How extreme weather impacts the canal
As explained, water reservoirs are an integral part of the Canal’s operation. Alas, the Panama Canal is facing a major water challenge due to a very unfortunate meeting of meteorological conditions, as well as a consequence of the El Nio phenomenon.
The El Niño phenomenon
The term El Niño (Spanish for ‘the Christ Child’) refers to a warming of the ocean surface, or above-average sea surface temperatures, in the central and eastern tropical Pacific Ocean.
The low-level surface winds, which normally blow from east to west along the equator (“easterly winds”), instead weaken or, in some cases, start blowing the other direction (from west to east or “westerly winds”).
El Niño has an impact on ocean temperatures, the speed and strength of ocean currents, the health of coastal fisheries, and local weather from Australia to South America and beyond.
El Niño recurs irregularly, from two years to a decade, and no two events are exactly alike.
We have never seen, and our HydroMed team had never seen a situation like the one we are facing right now. Not necessarily on the severity, but in the conditions that led to this drought to occur. Hardly ever in the past, we had had high temperatures in the Pacific Oceans alongside high temperatures in the Atlantic.
… noted Dr. Ricaurte Vásquez Morales
The current situation the canal is facing is very punctual, time wise and geographically speaking, Morales supplied. The Caribbean temperatures are extremely high, and the hurricane season is different. Storms and water and rainfall patterns are completely different to historical patterns. As a result, this is a situation that the Canal expects to be unique.
Given the fact that the Republic of Panama is so narrow and we don’t have a mountain barrier that will allow for winds to move differently has led to the situation that we are facing.
… added Dr. Ricaurte Vásquez Morales
Increased waiting times
While the average number of vessels during the low season typically stands at 72, the current queue has skyrocketed to a staggering 116 vessels. This unexpected surge in traffic has caught the attention of industry experts and raised questions about the underlying factors contributing to this unprecedented congestion.
The average waiting time at the Panama Canal is about five days for those ships, especially those that do not have a reservation to transit. However, there have been instances where the waiting period has extended to a maximum of 14 days.
On the 9th of August, there was a peak of 163 vessels waiting for transit. This number is twice as astonishing considering that at its peak in high season, there are 138 vessels waiting in the queue.
To put the numbers into perspective, the average peak for Christmas inventories, when the canal is transiting the most cargo, is around 120 vessels.
In an effort to alleviate extended waiting periods, a new strategy has been implemented to release reservation slots that cater to longer wait times and prioritise vessels with the longest waiting periods.
In the realm of maritime transportation, there exists a pressing matter that warrants attention, particularly for vessels involved in the transportation of oil, crude, chemicals, energy products, and bulk cargo, Morales noted. These specific types of carriers face a unique challenge as they are unable to secure bookings in advance. As for container vessels, Morales explained that as they are mostly on time, they usually manage to book slots.
#1 Draft measures
The volume of water required for each vessel transit is independent of vessel size and depends on the type of lock used. Neopanamax locks use 200 million gallons of water, while Panamax locks use 50 million gallons. The amount of water used per transit is independent of vessel size and depends on the lock used.
Reducing draft allows vessels to come lighter and transit the Panama Canal, but it increases the effective cost of moving cargo through the canal. Charges are determined by volume, not cargo loads.
As a result, the Panama Canal will maintain a 79-foot elevation at Gatun Lake, providing 44-foot draft capacity for all vessels. The next approach will be to remain at 44 feet of draft and ensure that 70% of the vessels can transit the Panama Canal without draught restrictions.
Dr. Ricaurte Vásquez Morales further explained that if the canal needs to implement further measures, it will most likely further decrease daily transits.
#2: Daily transits and slot auctions
The canal now allows only 32 transits per day, down from the previous average of 36. This measure, Dr. Ricaurte Vásquez Morales explains, was implemented to improve water utilisation or make the most of the available water.
In order to reduce the waiting time of some of the cargoes waiting for transit especially, and the Panamax Locks is for supers, as we call them, then we will open that window to allow long waiting vessels to transit. Now, other considerations as far as booking and reservations will remain in full force.
… Morales stated
According to Morales, the number of auction slots will stay consistent until changing weather and water conditions arise. If the present water conditions hold, the auction procedure will continue as it did at the start of this week.
If we maintain the current water conditions, we will remain the auction process as it stands at the beginning of this week. What we are doing right now is to create a window, just a window, for a specific number of days to allow those vessels with the longest waiting time to transit at the Panamax Locks.
… said Morales
Once that window has closed, the canal will return to the auction system for both the Neo-Panama locks and the Panamax locks. So, the canal will return to the situation that existed before this week.
Will the canal suspend operations?
We do not believe that the canal will suspend operations. We will manage the water levels, not looking at current transits and just the water levels as they stand today or next week
…highlighted Dr. Ricaurte Vásquez Morales
Morales went on to say that if the current situation continues for the next twelve months, they are modelling what the adjustments will be so that they can announce that in a timely manner for their customers to make the necessary adjustments to their schedules and fleet assignments.
The operators recognise that doing so will result in a temporary loss for the Panama Canal. On the other hand, Morales stressed that they must be straightforward and open to the market in order to respond to the constraints presented by the canal’s lack of rainfall.
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