Panama Canal: Surviving Drought with Increased Profits

The photo is from the Panama Canal Authority.

In the fiscal year ending in September, the Panama Canal’s profits grew by approximately 9.5%, according to Reuters. This increase occurred despite a severe drought that reduced the number of ships passing through the canal, reported the canal’s authorities on October 25.

The third driest year in history

The year 2023 ranked as the third driest year in the canal’s recorded history, which limited available water for operations. As a result, canal authorities were forced to lower the number of ships allowed to transit daily from late 2023 into early 2024. They also had to impose draft restrictions on vessels.

The limitations led to lengthy delays for some ships, while others had to seek alternative routes. Following rainfall that replenished national reservoirs, the restrictions were lifted later this year. During this period, the waterway managed 423 million tons of cargo through its locks. It also had an average passage of 27.3 ships per day, a decrease of 8.7 ships from the year before.

However, operating costs reduced by five percent helped alleviate the drought’s economic impact. Panama Canal’s vice president of finance, Victor Vial, noted that revenue increased by $18 million to reach $4.99 billion.

Currently, the canal often struggles to fill all 36 daily transit slots available. To attract more ships back, it is now offering incentives for some vessels. This includes bulk carriers and liquefied natural gas tankers.

“Transit traffic is gradually recovering,” Vial commented, as reported by Reuters.

Implementing $8.5 Billion in Projects

The canal is also working with $8.5 billion projects for the next seven years, with plans for new infrastructure, among other upgrades.

Reuters also reports that a new long-term reservation system allows shipping companies to participate in auctions for transit slots up to a year in advance. Other measures include conservation strategies that reduced water usage per transit by 12% over the past fiscal year.

To prepare for extreme weather conditions, Panama is also working on a $ 1.6 billion project to dam the Rio Indio River. This project will create a new reservoir but will require the relocation of hundreds of families living near the canal area.

Track vessels passing through the Panama Canal by clicking on the photo below!

Pictured on the screen shot is the 74,000 DWT Socrates (IMO: 9390692) passing the ports of Balboa, Cristobal, and Manzanillo.