During a severe drought year, there’s a certain kind of silence at the Panama Canal. Ships slow, lighten their loads, and occasionally turn around for the lengthy detour past Africa, but they do not completely vanish from the horizon. Lake Gatun appears smaller than it actually is from the air, with its banks exposed like a tide that has forgotten to return. Despite its legendary engineering, the canal is powered by rainfall. Additionally, rainfall no longer behaves as it once did—a lesson Panama has learned the hard way.
The area experienced such a severe drought between late 2022 and 2024 that the canal authority was forced to ration what is essentially drinking water for international trade. The Panama Canal Authority’s director, Ricaurte Vásquez, told CNBC that the canal uses roughly 2.5 times as much water every day as New York City. People are often interrupted in the middle of their sentences by that figure. It also explains why container rates from Houston to Yokohama can fluctuate during a few dry seasons.
| Key Information | Details |
|---|---|
| Subject | Panama Canal Authority (ACP) |
| Administrator | Ricaurte Vásquez Morales |
| Location | Republic of Panama |
| Annual Cargo Value | Roughly $270 billion in goods handled each year |
| Primary User | The United States, accounting for ~73% of canal traffic |
| Water Source | Lake Gatun, fed entirely by rainfall |
| Daily Water Use | ~2.5 times the daily consumption of New York City |
| Fiscal Year 2024 Transit Drop | 29% decline overall; LNG down 66%, dry bulk down 107% |
| Major Projects Underway | Dam to feed Lake Gatun; land bridge with natural gas pipeline |
| Next Climate Risk Window | El Niño expected in 2027 |
| Average Vessel Transits (Good Year) | Over 50 per day through the locks |
The fiscal year 2024 numbers are so striking that they don’t really belong on a press release. Overall, transits decreased by 29%. LNG traffic decreased by 66% and as much as 73% at one point. LNG carriers haven’t really made a comeback, even now that water levels are back to normal. They’ve just grown accustomed to circumnavigating the Cape of Good Hope, lengthening their travels by weeks and using additional fuel that is eventually paid for by someone.
The canal might never be able to fully recover that traffic, at least not in the same manner. Shipping is a habit-based industry, and once a habit is broken, it often takes on new forms. Some of the carriers who rerouted seem to view Africa as insurance against the upcoming dry year rather than as a detour.
Vásquez’s answer is audacious and somewhat unexpected. A land bridge across the isthmus, a pipeline that transports natural gas liquids from an Atlantic terminal to a Pacific one, where another vessel picks them up bound for Asia, and a dam to replenish Lake Gatun are the two most notable projects the authority is pursuing. It would include two port terminals and a road. However, neither project will be completed prior to the 2027 El Niño forecast. That particular detail remains unresolved.
According to Vásquez, American energy companies are “drooling” over the alternative. You can understand why it might be true, but perhaps that’s just the lingo used in pitch meetings. The project was announced in Tokyo instead of Washington or Houston because Tokyo is the biggest consumer of these goods. In this area of the business, dependability is suddenly more valuable than speed.
The question of whether engineering can outrun the climate that initially revealed the canal’s vulnerability is more difficult to answer. As this develops, it’s hard to overlook the irony: a waterway that subtly supports roughly 40% of all container traffic in the United States is under threat from something as commonplace and as altered as rain rather than geopolitics or sabotage.
