The saying goes that a rising tide floats all boats; unfortunately the reverse is also true. This week’s Industry Today feature discusses how Panama Canal’s low water levels may potentially sink supply chains. Bart De Muynck, Chief Industry Officer at project44, writes:
“The Panama Canal, an essential artery of global trade connecting the Atlantic and Pacific Oceans, is currently grappling with a severe drought. Water levels continue to decrease, raising concerns about the potential impact on supply chains and peak season shipping. Rainfall was less than 50% of normal from February to April near the canal and the lakes that feed it, according to ACP (Autoridad del Canal de Panamá). Water levels in the larger of the two lakes that feed the canal, Lake Gatun, are projected to hit historic lows in July.”
This represents significant challenges. The drought has already led to restrictions on normal operating drafts (the minimum amount of water required to float a ship), down from 50 feet to 44 feet as of last May. What that means is ships are forced to reduce cargo loads. Consequently, as De Muynck points out:
“With decreasing water levels, larger vessels may experience draft restrictions, limiting their passage through the canal. This disruption forces shippers to seek alternative routes, such as circumnavigating South America’s Cape Horn or opting for longer trans-Pacific or trans-Atlantic routes. These detours can result in longer transit times, increased fuel costs and potential congestion at alternate ports, impacting supply chain efficiency and timely delivery…[that] may lead to higher freight rates as carriers seek to optimize their operations and cover the additional expenses associated with longer routes or port congestion.”
How can manufacturers best prepare for a potential drought of supply during peak shipping season due to the drought in the Panama Canal? Alas, De Muynck suggests things are going to get worse rather than better. “ It is expected that the situation will only be exacerbated by El Niño heading into 2024 – so it is imperative manufacturers figure out their risk management strategies as soon as possible.”
Read the complete article, Navigating the Dry Waters of the Panama Canal. Additional suggested reading is last week’s How Weather Disasters Impact the Supply Chain.
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Tags: supply chain disruption, Panama Canal, drought, severe weather, Susan Poeton, #SusanPoeton, #SuePoeton, Sue Poeton, Industry Today
Susan Poeton 