The Panama Canal, known as the “Golden Water Route”, connects the Atlantic and Pacific oceans and covers an important hub of global maritime transportation, and 180 maritime routes have passed through it, connecting 2,000 ports around the world. However, this “human engineering miracle” has faced a severe water shortage crisis in recent years. Although 2023 is the third lowest year since the Panama Canal officially recorded more than 140 years ago, with climate change and an increase in population along the route, the future operational challenges of the canal remain huge.

In 2023, Panama suffered from severe droughts, impacted by the El Ni?o phenomenon, resulting in a significant reduction in precipitation in the canal area. According to the Panama Institute for Meteorology and Hydrology, 2023 was the third lowest year in the canal area, while the fiscal year of 2023 was the lowest fiscal year since 1951. Panama generally entered the rainy season in May, but in 2023, due to the El Ni?o phenomenon, the rainy season did not arrive until June, and the actual precipitation was much lower than normal.

In order to safeguard the passage of the canal, the Panama Canal Administration began to impose restrictions from July 2023, gradually reducing the number of daily passing ships from the normal 36 to 38 ships to only 22 passing ships per day by December, while limiting the depth of drinking water for cruising ships. This measure resulted in ships waiting for the river to increase dramatically, with unbooked ships waiting on average for 10 days, and some ships even waiting for more than 20 days.

Despite the double challenges faced by drought and limitation, the revenue of the Panama Canal grew reversibly. According to the Panama Canal Administration’s Annual Report, the canal cargo transit amounted to approximately 5.11 billion tons in the fiscal year 2023, down by 1.5 percent from the fiscal year 2022, but revenue grew significantly by 14.9 percent to 49.6 billion dollars thanks to the auction of ship seats and adjustment of the tolling pattern.

In order to mitigate the congestion, the Canal Authority began to auction additional riverboat spots to row ships. In early November 2023, the Japanese Cincinnati Group picked up riverboat spots for one of its own ships at a price of $4 million. Due to the rising cost of using the canal, international shipping companies such as Maersk, Mediterranean Shipping, Herberto and Da Vinci announced increases in shipping prices, adding more than $100 per standard box for routes through the canal, and more than $300 per standard box for some routes.

While the arrival of the Panama rainy season in 2024 has mitigated the water shortages of the canals, due to the double impact of climate change and the rapid increase in water consumption, canals will likely become more frequent in the future.The director of the Panama Canal Administration, Basques, said water shortages will occur every five to six years before the canal, but due to the severity of the shortages, canals may be more frequent in the future.

A study by the World Weather Association indicates that water shortages in canals will become more common due to global warming. With the current global warming of 1.2 degrees Celsius, the rate of occurrence of a 2023-sized channel water shortages is 40 per year. As global warming continues to worsen, the channel water shortages cycle will be more difficult to predict in the future.

In addition, fresh water from the reservoirs along the Panama Canal serves as a livelihood water for more than half of the population in Panama. According to the Canals Administration, 4.27 billion gallons of water from the reservoirs along the canal are drawn daily to be purified to meet the needs of the residents. As the population of Panama grows, the “man river rafting” phenomenon has exacerbated the canal’s water shortages.

In order to address the long-term shortage of water, the Panama Canal Administration has proposed a number of solutions, most notably the construction of a reservoir on the Indian River along the Lake Cactus and the use of river water to supplement the Lake Cactus.

However, the Indian River Reservoir Project is facing serious challenges. First, the Indian River needs to be approved by the Panama Government and Congress to build reservoirs outside the scope of the Canal Authority’s jurisdiction. Second, the construction of reservoirs will affect the lives of local residents, sparking opposition from local farmers. In addition, Panama is about to celebrate a new government, and the current government may decide to leave it to the next government.

In response to the challenges posed by climate change, the government of Panama approved the “Dry Canal” plan in March this year to make full use of existing infrastructure through modern logistics platforms and simplified customs procedures to share the freight pressure of the Panama Canal through land transportation.

The Panama Canal Authority said it will closely monitor the weather conditions to ensure that the canal operates properly.Despite the double challenges faced by climate change and population growth, the Panama Canal Authority is confident that it will provide reliable safeguards for global trade through a range of measures to safeguard the long-term stable operation of the canal.