Panama Canal catches up with the new norm

The past year has been tough for Panama. The worst drought in over 75 years caused Lake Gatun, which feeds the Panama Canal, to lose over 10% of its water. According to the Panama Canal Authority (ACP), by September 2023, water levels had dropped to 79.8 feet from a high of 87.2 feet, limiting the canal’s capacity for larger vessels.
In October, the Panama Canal reduced transit slots by up to 50%, forcing vessels to wait, and pay high fees to skip the queue or reroute around Cape Horn. Fortunately, water-saving measures, transit restrictions, and early spring rains helped. In May, more transit slots were opened, and by August, the maximum authorized draft for Neopanamax vessels increased, with daily booking slots rising to 36. The goal is to reach 38 transits per day by October.

The canal is expected to return to full capacity soon. However, the drought severely impacted the local economy, as the canal directly or indirectly contributes 20% to Panama’s GDP. Additionally, Lake Gatun, which supplies half the population with drinking water, was under pressure. Thankfully, water supplies for the public remained unaffected.
Looking ahead, Panama is working to prevent similar issues in future droughts. The ACP has proposed a $1.6 billion Rio Indio Reservoir project to supplement Lake Gatun, though it could take up to six years to complete. In the meantime, short-term solutions, such as cross-chamber lockages, will help conserve water.

The Panama Canal is also adapting to changing trade patterns to remain competitive. Container ship transits have risen by over 30%, while dry bulk and gas cargo traffic has decreased due to market shifts and higher costs to secure transit slots, causing some vessels to reroute around Chile. GAC Panama played a key role during the disruption, providing timely information to customers through daily bulletins and meetings, and offering strategies to minimize delays. Their “education, information, and implementation” approach helped customers navigate the challenges effectively.

The drought has highlighted Panama’s reliance on Lake Gatun and rainfall. GAC Panama has taken steps to address these environmental concerns, including reforestation efforts across 25,000 acres of abandoned pastures. This commitment aligns with GAC Group’s sustainability policy to “adapt, innovate, and reduce” for a sustainable future.
While future restrictions may be unavoidable, GAC Panama remains dedicated to supporting customers and securing the canal’s long-term viability.