Panama Canal says shipping rebound is underway after record drought

PANAMA CITY : After two years of record drought conditions amid a challenging El Nino weather system which decimated vessel transits, the Panama Canal is experiencing a trade rebound.

Ricaurte Vásquez, administrator of the Panama Canal Authority, tells the canal has changed its business model to optimize water usage and improve forecasting in an effort to restore certainty and reliability, introducing a new long-term booking system and planning to make a decision on a potential dam project early next year.

The canal is critical to the U.S. economy and trade. The U.S. is the largest user of the Panama Canal, with total U.S. commodity export and import containers representing about 73% of Panama Canal traffic, and 40% of all U.S. container traffic traveling through the Panama Canal every year. In all, roughly $270 billion in cargo is handled annually.

The Panama Canal’s move to a fully booked system has resulted in an increase in the average vessel size, allowing more containers to go through the canal on fewer vessels, and saving water and helping to reduce wait times. This strategy led to a windfall of between $400 million-$450 million in the fourth quarter.

“Container [vessels] took a good chunk of those slots, and that provides certainty that they will transit,” said Vásquez. “Our water forecast is much better right now for the next year. It is more optimistic, and we are currently working at essentially the normal levels of water, both at Lake Gatun and almost at Alajuela Lake.”