Affected by water shortage, the "new low" water level of Panama Canal impacts international trade

In the past few months, Latin America, including Panama Canal, has continued to suffer from a lack of rain, the water level of lakes and rivers has dropped, and the Panama Canal is also facing drought. The decrease in canal water level means that shipping draft is limited and the number of ships passing through is reduced. Industry insiders are concerned that international logistics costs may rise as a result, pushing up prices in the international raw material market and having a negative impact on the global supply chain.
Encounter drought
Located in Central America, Panama Canal connects the Atlantic and Pacific water systems and is one of the world's important shipping arteries. According to the data of Panama Canal Authority, Panama Canal currently provides about 180 sea routes, which can connect about 170 countries and reach about 1920 ports around the world. According to the data of the United States Department of Commerce, Panama Canal is the "artery" of shipping trade between Asia and the United States, and the volume of goods transported through the canal accounts for 46% of the total market share of containers from Northeast Asia to the East Coast of the United States.
The Panama Meteorological Department stated that this year, the El Ni ñ o phenomenon has swept across Latin America, and countries such as Panama have experienced prolonged periods of low rain and high temperatures, resulting in droughts in many regions. Agence France Presse said that Gatun Lake, which supplies water to Panama Canal, had the lowest water level on record.
Affected by water shortage, the Panama Canal Authority has recently lowered the draft of ships several times. Some large ships have to reduce their load in order to pass through.
Impact on logistics

The Wall Street Journal reported that the decline of Panama Canal transport capacity will damage the agricultural trade between the northern and southern hemispheres. Bananas from Ecuador, meat from Brazil, wine from Chile, etc. were originally transported through Panama Canal.

The transportation of bulk commodities such as energy may also be affected. According to the US Consumer News and Business Channel, about 26% of Panama Canal's annual transportation business involves liquefied petroleum gas, liquefied natural gas, etc. Although energy transport vessels are not affected by the new draft restrictions, canal congestion caused by factors such as water level drops and an increase in small vessels can affect transportation efficiency.
Li Qiang, Dean of the School of International Relations of Tianjin Foreign Studies University, said that climate change has caused concern about the obstruction of international logistics. The measures taken by the Panama Canal Authority may force unqualified ships to bypass Cape Horn in South America, or make cargo ships significantly reduce their carrying capacity and allocate goods of the same weight to more cargo ships. Both options will significantly increase logistics costs, extend logistics time, and have a negative impact on international trade.
Extreme weather may also impact the global trade order. Li Qiang said that the rising shipping costs of Panama Canal may lead to the rising prices of energy, agricultural products, basic raw materials and other commodities, which will further exacerbate the food crisis, the Energy crisis, global inflation, etc., or will strengthen the advantages of developed countries in the existing trade order and supply chain, expand the "scissors gap" between North and South countries, and exacerbate the relative disadvantages of developing countries.
Joint response
The website of Forbes magazine reported that the continuous high temperatures and droughts in Panama have sparked reflection on climate change. People are increasingly realizing the importance of achieving low-carbon environmental protection and promoting sustainable development of the canal shipping industry.
Li Qiang stated that in response to the impact of climate change on economic activities, it is necessary for the international community to accelerate the green and low-carbon transformation. Countries should fulfill their commitment to "national independent contribution", reduce carbon dioxide emissions, achieve carbon peak carbon neutrality as soon as possible, control global warming within 2 ℃ higher than before the industrial revolution, and try to approach 1.5 ℃ as much as possible. At the same time, countries should also strengthen climate resilience construction and enhance their ability to adapt to climate change. Developed countries should fulfill their $100 billion climate funding commitment as soon as possible to help developing countries enhance their ability to adapt to climate change.
"In the face of increasingly frequent extreme weather events and increasing costs of climate disasters, all countries should carry out pragmatic and close cooperation, adhere to the principle of common but differentiated responsibilities, implement the requirements of the United Nations Framework Convention on Climate Change and the Paris Agreement as soon as possible, and fundamentally reduce the frequency of extreme weather events." Li Qiang said.