Q24N (DW) The Panama Canal is a huge deal for global shipping – it connects the Atlantic and Pacific Oceans, cutting down the amount of time it would take to go around the southern tip of South America.
Before the canal was built, sailing around Cape Horn was a dangerous journey, with thousands of sailors dying in the stormy seas. The canal saved around 13,000 kilometers (8,000 miles) of travel, meaning ships could get to their destinations quicker and cheaper.
But now, climate change might be putting it at risk.
When the locks are opened, millions of liters of fresh water pour out into the ocean, lowering the water level in the canal, which is usually replaced by more water. But with climate change leading to lower rainfall in Central America, there’s less water for the canal. And if the fresh water that flows out of the canal’s locks can no longer be replaced, then large ships will find it increasingly difficult to pass through.
Where does all the water come from?
So much fresh water is used in the Panama Canal because ships have to go through 12 locks that take them up or down 85 feet.
According to Everstream, a consulting firm that tracks supply chains for international companies, it takes around 200 million liters of water for every ship passage.
The Panama Canal Authority is in charge of canal operations and has implemented some serious draft restrictions lately. Draft is the distance between the waterline and the bottom of the ship, which affects how much water is needed for the ship to sail safely.
The normal operating draft for the canal is 15.24 meters, but starting May 24th, the biggest ships going through the Canal will be limited to 13.56 meters.
By May 30th, the draft will be decreased to 13.4 meters. Unfortunately, the Everstream analysts don’t believe the situation will get better anytime soon and it could even become worse for shipping businesses.
To make matters worse, the Everstream analysts do not expect the situation to improve for the rest of spring. In fact, things could get worse for the shipping business.
Hapag-Lloyd, a Hamburg, Germany-based shipping company, and other international shippers have responded by loading fewer containers in order to reduce the draft of their ships.
To compensate for the loss of income, Hapag-Lloyd will introduce a surcharge of $500 (€465) per container going through the Panama Canal starting June. Trade experts fear a disruption to supply chains and longer transport times that will affect prices.
Not everyone is panicking
Vincent Stamer takes a more relaxed view of water levels in the Panama Canal and possible consequences for global trade. “It won’t really be critical for the supply chains for the time being,” the economist from the Kiel Institute for the World Economy told DW.
It won’t be like in 2021, when the container ship Ever Given got stuck and blocked the Suez Canal. “The Panama Canal is not as important for the global economy as the Suez Canal,” Stamer explained.
In addition, 90% of world trade is moved across the world’s oceans and has demonstrated a relatively pronounced resilience in recent years. “After the multiple strains caused by ship congestion, port closures and lockdowns in recent years, the supply chains have recovered significantly,” he said.
Global consequences of climate change
In Europe, too, low water levels have caused headaches for the authorities in recent years.
Last summer, the Rhine, an important inland shipping artery, was at record lows in sections. This hurt shipping and deliveries to factories. It also caused the price of petrol and heating oil to rise. A lack of snow in the Alps is threatening to create the same problem again this year.
Maritime navigation authorities are considering countermeasures for the Rhine like deepening the river in places. Another, much more expensive solution, would be to build dams that could be used to maintain or increase water levels in important sections of the river.
For the Panama Canal, other solutions are being considered. They include water-saving sluices that would collect freshwater in basins so it can be reused. To this end, possibilities are being examined to develop and exploit other water sources near the canal. The construction of reservoirs and saltwater desalination plants are also being considered.
Many other options
If all these countermeasures come too slowly and passage through the canal became uneconomical, would Europe be threatened with something similar to the Suez Canal closure debacle?
“No, definitely not,” Vincent Stamer is certain.
“Only 2% of German seaborne trade goes to the Pacific coast of the American continents. The sea connections to the east coast of the US and trade with neighboring European countries by road play a much larger role,” he said.
Until long-term solutions are found for the Panama Canal, the economist sees other ways of dealing with the water shortage in Central America. “Reducing the load is certainly the easiest way for shipping companies. And the use of smaller ships is possible too.”
Stamer also sees other alternatives. “The transport route from Asia through the Panama Canal to the US’ east coast can be partially rerouted through the Suez Canal,” he said. “Alternatives are less well established on the route between Europe and the US’ west coast. But a combination of the above measures with a greater use of air or land transport across the US is conceivable,” he concluded.
This article was originally published at DW.com in German.