Maritime trade and shipping face endless crises in recent months and weeks for various reasons, most notably the confluence of geostrategic tensions in some regions, with adverse natural changes in other areas around the world. Wars and international conflicts in crucial maritime straits, like the Strait of Hormuz at the entrance of the Arabian Gulf, or the Bab al-Mandab Strait at the entrance to the Red Sea, lead to increased shipping costs due to the doubling of insurance service costs or forcing major shipping companies to adopt longer alternative routes despite the cost increase, as occurred with the Cape of Good Hope route instead of the Suez Canal following the Houthi group attacks on some ships suspected of heading to Israeli ports. Away from military tensions, the Panama Canal, which connects the Pacific and Atlantic Oceans in Central America, is experiencing an unprecedented crisis caused by climate changes and rising ocean water temperatures, leading to a water shortage. The Panama Canal offers significant advantages to the world's maritime trade due to its strategic geographical location. It is a vital artery for the economies of the Americas. The Panama Canal administration had to reduce the number of vessels crossing daily from 37 to only 18, significantly affecting global trade movement and doubling disruptions in markets and supply chains worldwide. This is the first time the Panama Canal has been forced to restrict the number of passing vessels. Al Jazeera Net presents a question and answer format on the dimensions of the shipping and trade exchange crisis, due to the water shortage in the Panama Canal. ## What is the scale of international trade passing through the Panama Canal? The canal is a vital waterway commercially and militarily, with approximately 13,000 ships passing from the Atlantic to the Pacific annually, averaging 37 ships daily. These ships carry nearly 235 million metric tons yearly, with 70% of them transporting goods between American and Canadian ports on the Pacific and Atlantic. Under normal conditions, the Panama Canal handles about 5% of global maritime trade volumes and 46% of container trade moving from East Asia to the U.S. East Coast. The canal is Panama's largest source of revenue, generating $4.3 billion in 2022, a significant figure for a country with just over 4.5 million inhabitants. ## Why was the Panama Canal dug? The distance from San Francisco, California on the Pacific Ocean to New York on the Atlantic Ocean, is about 21,000 kilometers if ships sailed around South America, while the same journey is less than 8,000 kilometers if made through a canal in Central America. After failed attempts by France, the U.S. Congress commissioned a scientific committee in 1899 to study the feasibility of potential channels for national security and American trade. The canal serves several natural lakes, and massive "locks" control the water from neighboring river floods, elevating immense ships by water pumping to sea level in various canal areas. With three sets of main locks, their size determines the dimensions of vessels that can use the canal. For example, giant commercial oil tankers or massive aircraft carriers cannot pass through. Ships transit the 82-kilometer-long canal between the oceans in approximately eight hours, but they must wait outside for long due to the canal's narrowness that does not allow two-way simultaneous traffic. ## Why is the Panama Canal currently facing a significant crisis? The past year experienced unprecedented drought levels, and 2023 recorded some the highest temperatures in history. The increased temperatures in the Atlantic Ocean and the delayed rainy season in Central American countries directly affected the water levels in the Panama Canal reservoirs and adjacent lakes, essential for its operations and the transit of ships and containers between both oceans. ## How have Panamanian authorities dealt with this crisis? Authorities acknowledge that there is no magic solution to this issue, and the Panamanian government's current operational strategy focuses on water conservation methods, ensuring transparency for its clients to avoid surprise changes. The lack of rainfall led to a reduction in daily transit operations in the Panama Canal. Authorities aim to store as much water as possible in lakes part of the canal, served by numerous reservoirs, dams, and large steel gates minimizing the available water leakage. The water conservation strategy includes setting maximum withdrawal limits and daily transit capacity. The Canal Administration decided to impose a gradual reduction, reducing the daily number of ships from 37 to 18, adequate while ensuring water availability for human consumption and the canal's operation during the upcoming dry season. Recently, the Canal Administration adjusted its numbers to allow for 24 ships to transit daily. ## What are the main alternatives to the Panama Canal's climate setback? The crisis has reversed the guaranteed and safe shipping routes for over a century. Major shipping companies and concerned Central American countries are exploring alternatives, which include: * Reverting to land trucks and transports or trains, though this is a much slower and costlier alternative, as container vessels carry the equivalent of thousands of trucks' cargo in a single trip. * Other countries, like Mexico and Nicaragua, are considering alternatives such as cutting new channels as an alternative to the Panama Canal. However, that option faces years of necessary studies and the search for significant funding, not to mention many political considerations. * Another alternative is the long and costly route around South America, along with the Northwest Passage, a maritime course skirting the Canadian Arctic coast, which may become feasible, especially with ongoing climate changes and rising temperatures. ## Is it easy to resort to these alternatives? None of these alternatives provide a solution to the Panama Canal crisis. The proposed alternative channels will face the same climatic phenomenon that affects the Panama Canal. Moreover, land alternatives cannot compete with ships carrying over 14,000 containers on a single trip. The most realistic option remains to continue developing and expanding the Panama Canal instead of competing with it, according to observers. ## What impact does all this have on global trade movement in 2024? The year 2024 began with the continuing crisis of the Israeli aggression on the Gaza Strip, prompting the Houthi group in Yemen to attack ships transiting the Red Sea at the Bab al-Mandab Strait. Trade volume through the Suez Canal decreased by 40%, as ships diverted around the African continent. Similarly, trade through the Panama Canal, the second most congested man-made shipping route, fell by 30% since November of the previous year. ## What is the United States' connection to the Panama Canal? After recognizing Panama's independence in 1903, both countries signed a treaty granting Washington the permanent right to use a 16-kilometer-wide canal area connecting the Pacific and Atlantic Oceans, serving trade movement between the east and west of the Americas, and reducing the distance between the U.S. East Coast and East Asian countries. Washington agreed to pay Panama an annual amount of $10 million starting in 1913. On July 12, 1920, President Woodrow Wilson officially opened the Panama Canal. Over the following decades, the United States expanded and developed the canal's complex engineering system until 1977, when a treaty ensured the transfer of canal ownership and management to the Panamanian government, guaranteeing Washington the right to defend the canal's neutrality and keep it open for global trade.
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