The prolonged drought in Panama continues to weigh on the supply chain. Since the most recent transit limitations, conditions have worsened, resulting in a continuous decline in daily transits projecting to be as low as 18 per day by February. The restrictions have led to an estimated $200 million loss in revenue during the summer months. Carriers are monitoring the situation closely, questioning the long-term viability of the canal for Asia-US East Coast routes. Limits on neo-Panamax locks affect fully loaded ships, impacting 25-30% of the global container fleet.
PLANS FOR NEW INFRASTRUCTURE
To mitigate the situation, proposed infrastructure is being considered, estimated to cost around $2 billion. A key aspect of the expansion plans is the construction of a new reservoir on the Indio River. The reservoir would be connected to the canal’s Gatun Lake through a five-mile-long pipeline. Additionally, another pipeline is proposed to draw water from the Bayano Lake into the canal system. These infrastructure projects aim to secure water supplies for both the canal and the local population.
While expected to benefit the current water crisis, the development of these infrastructures also faces multiple challenges. The proposed construction falls outside the existing land area controlled by the Panama Canal Authority, necessitating approval from the Panamanian government. This approval process is further complicated by upcoming government elections in May 2024. The decision on the canal’s expansion strategy may be delayed until a new government is elected.
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