Editor’s Note: Editor’s Note: This is an updated version of a story that originally ran on August 26.
Panama is about halfway through its rainy season right now, and one of the wettest countries in the world is having one of its driest seasons on record.
At the Panama Canal, where freshwater serves as the lifeblood for its lock-driven operations, the lack of abundant rainfall is leading to lower water levels and putting a squeeze on a critical international shipping artery: Canal authorities have imposed restrictions on vessel weights and daily traffic.
While the direct impact to US manufacturers, retailers and consumers appears to be minimal right now, the potential for broader disruption is growing.
It’s another instance of a weather-impacted waterway slowing down the flows of critical freight — like shallower levels in the Rhine River and the mighty Mississippi or the high winds and sandstorm blamed for making the massive Ever Given vessel run aground in the Suez Canal two years ago.
Whether driven by climate, weather, geopolitics or some other unforeseen circumstance, any increase in maritime choke points could spell trouble for the global supply chain networks that have run much more smoothly since their pandemic-era upheavals.
“About 80% of our merchandise in trade is moved via vessel over the water,” said Janelle Griffith, North American logistics leader for insurance brokerage and risk advisory firm Marsh. “So we actually should be concerned when we see those sorts of blockages. And, yes, it does have global ramifications … when you have a blockage in one part of the supply chain, the rest of the supply chain is automatically affected.”
Not enough water
The Panama Canal relies on water from the neighboring freshwater lakes. A lock system then uses massive amounts of water — at least 50 million gallons of it — to float each vessel through the canal.
Normally, at this time of year, the lake levels are increasing. However, rainfall in Panama this spring and summer has been the lowest since the turn of the century, said Jon Davis, chief meteorologist at Everstream Analytics.
“It doesn’t mean that freshwater lake levels are going to decline, but we don’t see any significant improvement here upcoming as we look into next month,” he said. “And with El Niño beginning to intensify and every climate model out there indicating that El Niño will continue to intensify through the rest of this year and into early 2024, that is a concern longer term.”
That could lead to further drier conditions across the southern portion of Central America, including Panama, he said.
“We never know the magnitudes of disruptions, and we never know how backed up of a supply chain we’ll get; it certainly looks like we’re going down that direction of increasing problems,” he said.
Next shoe to drop
But from a transportation standpoint beyond Panama, the next shoe to drop could be the Mississippi River, Davis said.
Rainfall along the southern Mississippi River has been well below normal in recent weeks. Some of the variances in rainfall are among the lowest since 1893, Davis said.
The dry pattern, along with the record heat seen along the Mississippi from Minneapolis to New Orleans, is expected to result in river levels dropping this month, he said.
Lower water levels could lead to restrictions at a time when crops in America’s heartland are being harvested and barged down the river to domestic and export markets.
“So you’re dealing with a situation where we have issues in Panama, and we likely will have some issues on the Mississippi with movement of commodities, especially agricultural commodities,” he said. “And so you deal with a compounding supply chain issue. And when you have two disruptions versus just one, that is magnified overall.”