Drought-induced Panama Canal Restrictions Raise Concerns for Global Logistics,

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The ongoing severe drought, prompting restrictions on daily crossings at the Panama Canal, poses a significant threat to global supply chains, according to S&P Global’s report on Wednesday. The canal, a vital artery for international trade, has been compelled to implement limitations due to dwindling water levels, potentially impacting worldwide logistics during a period of heightened demand.

Despite a recent uptick in daily crossings, with the Panama Canal Authority increasing the quota to 27 from 24 last month following improved water levels at Gatun Lake, constraints persist. S&P Global’s transportation analyst report highlights the mounting pressure on supply chains, particularly affecting categories beyond container ships, such as bulk carriers.

Also Read: The Panama Canal Odessey – A Vital Link for Global Trade Stares at an Uncertain Future

While container ships maintain priority passage, transit restrictions have taken a toll on other vessel categories. The canal authority aims to restore daily slots to around 36 per day, aligning with typical figures during the rainy season, contingent on anticipated rains resuming in May.

However, challenges persist in meeting demand, exacerbated by limitations on water levels at reservoirs supplying the canal. These constraints prevent the canal from fully accommodating shippers seeking alternative routes, notably away from the Red Sea, where recent attacks by Houthi militants have disrupted traffic flow through the Suez Canal, the busiest maritime route globally.

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