A worsening drought in the %PanamaCanal is putting further pressure on global shipments of %Commodities ranging from liquefied natural gas (LNG) to soybeans.
The Panama Canal Administrator says that severe drought conditions have forced it to reduce the number of ships traveling through the trade corridor each day by as much as 36%.
The canal’s administrator adds that declining water levels are likely to cost it $700 million U.S. in lost revenue this year.
For shipping companies and commodities dealers, the Panama Canal drought hits them with an economic blow at the worst possible time.
The global shipping and logistics industry is already reeling from armed attacks and missile strikes along the Red Sea shipping corridor by Houthi militants who are protesting Israel’s war with Hamas.
The attacks in the Red Sea have forced leading shipping companies such as Moeller-Maersk (CPH:MAERSK-B) to temporarily halt shipments through the trade route that connects Europe and Asia.
The combination of drought in the Panama Canal and attacks in the Red Sea are disrupting global trade, delaying shipments and raising transportation costs.
The current drought in the Panama Canal has led to a severe traffic jam of vessels and cast doubt on the canal’s future role as an international shipping lane.
Canal authorities have cut the number of daily ship crossings through the canal to 24 from 38 in normal times. The administrator blames the drought on an El Niño weather pattern this winter and climate change effects.
The financial impact of the shipping route chaos has not yet been calculated. But the current disruptions are impacting shipments of products ranging from oil and aluminum to corn and wheat, say market analysts.