The Panama Canal, known as the "Golden Waterway," faces the challenge of "water scarcity"

The Panama Canal, known as the "golden waterway," guards the junction between the Atlantic and Pacific oceans, with 180 shipping routes passing through, connecting nearly 2000 ports worldwide.

In 2023, Panama, which has the fifth highest average annual precipitation in the world, faces a water shortage crisis in the canal. The situation has improved this year, but with climate change and the skyrocketing population along the route, this century long "human engineering miracle" that has connected the two oceans is facing severe long-term challenges.

Drought and water shortage once restricted travel

Affected by the El Ni ñ o phenomenon, Panama will experience severe drought in 2023. A study released by the Panama Institute of Meteorology and Hydrology at the end of 2023 showed that most of the sampled watersheds across the country showed signs of drought, with precipitation significantly decreasing for six consecutive months.

The head of the Panama Institute of Meteorology and Hydrology, De Casadilia, told reporters that Panama usually enters the rainy season in May, but in 2023, due to the strong El Ni ñ o phenomenon, the rainy season does not arrive until June, and the actual precipitation is far less than normal.

According to the Panama Canal Authority, 2023 was the third year with the lowest precipitation in the canal area since official records began over 140 years ago, and the fiscal year 2023 (October 1, 2022 to September 30, 2023) was the year with the lowest precipitation since 1951.

The Panama Canal uses a lock system to lift ships from sea level to the artificial lake in the middle of the canal, Lake Gaton, allowing ships to pass through the river between the central mountain ranges of Panama. Every time the ship is lifted or lowered at the lock, a large amount of fresh water needs to be extracted from lakes along the line such as Gatong Lake.

Affected by drought, the water level of Jiatong Lake approached the design water level for a period of time in the second half of 2023. In order to ensure the passage of the canal, the Canal Management Bureau will implement traffic restrictions starting from July 2023, gradually reducing the daily number of ships from the normal 36 to 38 to only 22 in December. At the same time, the canal will also limit the draft depth of ships crossing the river.

The restricted travel measures have significantly increased the waiting time for ships to cross the river. According to the Panama Canal reservation system, as of the end of November 2023, an average of nearly 10 days are required for non booked vessels to cross the river, with some vessels even waiting for more than 20 days.

In order to alleviate congestion, the Canal Management Bureau began auctioning off additional river crossing berths from queuing ships, and the auction fees increased as the traffic restrictions increased. In early November 2023, Japan's Yinnengshi Group won a river crossing berth for a ship under its umbrella for a high price of nearly 4 million US dollars.

Due to the increase in the cost of using the canal, international shipping companies such as Maersk, Mediterranean Shipping, Herbrot, and Delta Air Lines announced a freight increase at the end of 2023, adding an additional fee of over $100 per standard container to routes passing through the canal, and some routes charging an additional fee of over $300 per standard container.

Although there is drought and water shortage, canal revenue has increased against the trend. According to the annual report of the Panama Canal Authority, the cargo volume of the canal in the fiscal year 2023 was approximately 511 million tons, a decrease of 1.5% compared to the fiscal year 2022. However, due to the auction of shipping spaces and the adjustment of toll collection models, revenue increased significantly by 14.9%, reaching $4.968 billion. It is expected that the canal revenue will continue to grow by 2.7% in the fiscal year 2024.

With the arrival of the rainy season in Panama this year, the water shortage in the canal has been alleviated, and the Canal Authority has begun to relax traffic restrictions. The management bureau announced in April that it will gradually increase the daily traffic volume to 32 ships, and the draft depth limit will also be relaxed. It is expected to fully resume normal operation by 2025.

The Canal Management Bureau stated in April that the number of ships queuing up to cross the river has basically returned to normal, and the average waiting time for non scheduled ships to cross the river is lower than last year and the same period in 2022. But the Canal Authority also emphasized that it will closely monitor weather conditions and tighten restrictions again if necessary.

The dual challenges are becoming increasingly severe

Although the current drought crisis has temporarily eased, the future canal water shortage may become increasingly frequent due to the dual effects of climate change and a surge in water usage by the population.

Last year, Basque, the director of the Panama Canal Authority, said in an interview with our reporter that the canal used to experience water shortages every five or six years, but based on the severity of this water shortage situation, it is possible that water shortages in the canal may become more frequent in the future.

A study released by the World Weather Attribution Alliance in May pointed out that due to the impact of global warming, canal water shortages will become more frequent. Research analysis shows that under the current global warming of 1.2 degrees Celsius, the occurrence rate of water shortage crises in canals of similar scale in 2023 is once in 40 years, and even within a normal El Ni ñ o cycle, precipitation in the canal area will decrease by 8%. The World Weather Attribution Alliance also pointed out that as global warming continues to worsen, the water shortage cycle of canals will become more difficult to predict in the future.

According to the Panama Institute of Meteorology and Hydrology, in the past 42 years, the national temperature has risen by 0.5 to 1.5 degrees Celsius; It is expected that by 2045, the national temperature will rise by another 0.5 to 2 degrees Celsius; By 2070, it will rise by 1.8 to 4 degrees Celsius.

The Panama Ministry of Environment predicts that under the continuous impact of climate change, most regions of the country will face rising temperatures and reduced precipitation, while seasonal precipitation in some areas will become more imbalanced, and extreme weather phenomena such as floods and droughts will become more frequent.

On the other hand, the phenomenon of people and rivers rushing for water has also exacerbated the water shortage in the canal. The fresh water from reservoirs along the canal is not only used for ship locks, but also responsible for providing domestic water for more than half of Panama's population. According to data from the Canal Management Bureau, 427 million gallons (approximately 4.5 liters per gallon) of water are extracted from reservoirs along the canal every day for purification to meet the needs of residents.

Panama declared a national environmental emergency in May 2023 to cope with long-term drought in the country. The Panamanian Ministry of Environment has warned that the El Ni ñ o phenomenon has caused problems such as sparse rainfall and increased evaporation, leading to low water levels in lakes along the canal and seriously affecting residential and agricultural water use.

The Canal Management Bureau also pointed out that due to the long-term drought in 2023, the backflow of seawater caused by ships crossing the river poses a threat to the water quality of the Jiatong Lake basin. Therefore, the management bureau has specially built a purification plant to ensure the quality of water for residents in the short term.

"The population of Panama is now ten times that of the canal when it began operation. The canal not only needs to accommodate more boats crossing the river, but also needs to supply millions of people with domestic water," said former director of the Panama Canal Authority, Kijano.

He told reporters that although the Canal Management Bureau has long been working to solve the problem of household water use, in recent years, the speed of climate change has exceeded the expectations of the Canal Management Bureau, and the contradiction of "people and rivers competing for water" has become increasingly prominent.

The solution encountered resistance

In order to solve the problem of water shortage in the long term, relevant departments have proposed various solutions in recent years, attempting to transfer water from other places to the canal. The main solution is to build a reservoir on the Indio River next to Lake Gatong, and use the river water to supplement Lake Gatong.

The Canal Management Bureau believes that the construction of the Indio River Reservoir can alleviate the shortage of water for the future canal and residents, while strengthening the canal's water resource allocation capacity and preventing drought disasters similar to 2023. It is estimated that after the completion of the reservoir construction, the newly added water source can meet the daily increase of 16 river crossing ships for the canal.

According to Panama's previously developed water security plan, the total construction and social costs of the Indio River Reservoir project are estimated to be approximately $900 million.

The Canal Management Bureau has repeatedly publicly stated that there are sufficient resources to build a reservoir, and stated that if everything goes smoothly, the Indio River Reservoir can be built by the end of 2030, and water supply to the canal will begin in the dry season of 2031.

However, in reality, the Indio River Reservoir project still faces numerous challenges.

Firstly, the Indo River is outside the jurisdiction of the Canal Authority, and the construction of reservoirs by the Authority requires prior approval from Panama and Congress to include the Indo River within its jurisdiction. The management bureau stated at the beginning of the year that it had submitted an adjustment application, but has not received a formal response so far.

Secondly, the Indo Valley region covers 580 square kilometers and houses over 12000 residents, with the Canal Authority predicting that the construction of the reservoir will affect over 2000 of them. The management bureau guarantees that if there is opposition from local residents, no reservoir will be built. At the beginning of this year, multiple local farmer organizations jointly issued a statement opposing the construction of the Indo River Reservoir.

Panama is about to usher in a new term this year. According to Panama's Star newspaper, the current Cortisso is preparing to leave the decision to build a reservoir to the next president.

In March of this year, Panama approved the "Dry Canal" plan, which aims to use modern logistics platforms and simplify customs procedures, fully utilize existing infrastructure, and share the pressure of Panama Canal freight through land transportation.

Former Secretary General of the Panama Maritime Authority and logistics expert Gonzalez believes that the purpose of the "Dry Canal" plan is not to replace canals, but to simplify customs procedures for existing cross-border land transportation routes and address the challenges posed by other Latin American alternative routes.

Panamanian economist Tapiro told reporters that the "Dry Canal" plan provides a legal basis for Panama to create more cross-border land transportation routes, which helps to enhance the stability of the international supply chain in the current deteriorating climate change situation.