The Panama Canal Has Become a Traffic Jam of the Seas

Vessel-tracking data show more than 200 ships currently waiting to transit, a figure that has been climbing since the canal capped daily transits to 32 last month from an average 36 under normal conditions.

The waterway’s entrances on the Pacific and Atlantic oceans are dotted with ships that are backed up for more than 20 days. Most are bulk cargo or gas carriers that are typically booked on short notice. Some shipowners are rerouting traffic to avoid the backlog.

“The delays are changing by the day. Once you make a decision to go there is no point to return or deviate, so you can get stuck,” said Tim Hansen, chief commercial officer at Dorian LPG, which operates more than 20 large gas carriers.

The canal, which uses three times as much water as New York City each day, relies on rainfall to replenish it. If there isn’t enough rain, ship transits are cut and those that cross pay hefty premiums that boost transport costs for cargo owners such as American oil and gas exporters and Asian importers.

The canal’s administrator, Ricaurte Vásquez Morales, said in late July that the restrictions could stay in place for the rest of the year. He said the drought is expected to erase around $200 million in revenue from the canal next year if low rainfall levels persist into the fall and winter.

He said extreme rain or drought conditions are more frequent occurrences than in the canal’s earlier years of operation. That issue presents a challenge for the Panama Canal Authority, which also supplies water to about 2.5 million people, or about half the country’s population.

“The Canal communicates with its customers so that the information allows them to make the best decisions even if it means that they may choose another route temporarily,” Vásquez Morales said. “Demand remains high which proves the Panama Canal remains competitive in most segments, even with measures to save water.”

The canal has hired the U.S. Army Corps of Engineers, the original canal builder, and has earmarked $2 billion over the next 10 years to divert up to four rivers into the waterway in addition to the three that already feed it.

The drought hasn’t caused wide disruptions for containerships, the canal’s biggest users in terms of transits. Most boxships are given preferential status because they run on fixed schedules and book crossings up to a year in advance. But some are caught in the maze and have to pay multiple times the average tolls.

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