Climate Risks Loom Over Panama Canal, a Vital Global Trade Link

Shallow waters, meet Christmas shopping.

Drought, aggravated by the burning of fossil fuels, is slowing down the ship traffic that carries goods in and out of the United States through the slender and vital Panama Canal, while heat and drought in the Midwest are threatening to dry out the Mississippi River, a crucial artery for American corn and wheat exports, in the months ahead.

It could be worse. There could be multiple droughts affecting several trade routes at the same time, disturbing the transport (and subsequent prices) of many types of goods like liquefied natural gas and coffee beans. That is a looming risk in a world that has become accustomed to everything everywhere at all seasons.

Last year, for instance, as Europe faced its worst dry spell in 500 years, ships carried a fraction of the cargo they normally do along the Rhine in Germany, one of the continent’s most important thoroughfares. The Rhine’s water levels are better this year, but the river faces a longer-term climate risk: The mountain snow and ice that feeds the Rhine is declining.

Last year, drought also slowed down ships on China’s most important river route, along the Yangtze, forcing companies to move their goods to Chinese ports by road, which is costlier. The Mississippi River shut down briefly in some parts last fall, too, because river levels were so low.

Exceptionally hot, dry conditions across the middle of the country this summer means that could happen again this fall. That’s bad news for American agriculture. Grains, grown in the Midwest, make their way down the Mississippi River by barge before being shipped through the Panama Canal and then transported across the ocean.

“In September, we may have some compounding issues,” said Jon Davis, a meteorologist who works with Everstream Analytics, a private company that advises other organizations on climate hazards in supply chains.

Drought is a recurrent natural phenomenon. However, the risks of drought are significantly higher in a world where the average global temperature is higher because of the burning of fossil fuels, coupled with the return of El Niño, a natural weather phenomenon that can last several years.

That could mean higher prices for American and European consumers, or less stuff on the shelves, as retailers prepare for holiday shopping.

“These kinds of issues, overall, are becoming more frequent,” Mr. Davis added. “Dryness in Panama, low levels in the Mississippi. Low levels in the Rhine. That’s of concern to anyone that has interests in global trade.”

Transport vessels on the Rhine in Bingen, Germany, in August 2022, passing portions of exposed riverbed.Credit…Wolfgang Rattay/Reuters

Droughts are not the only risk to global supply chains. Abnormally hot ocean waters are supersizing storms. The Atlantic hurricane season has been more active than usual; nine named storms have been recorded through mid-August.

Ocean shipping is how 90 percent of global goods reach one part of the world from another.

The area around the Panama Canalis experiencing an exceptionally dry year. That’s bad for the canal, because every ship that goes through needs millions of gallons of freshwater to float on, depending on how many containers it’s carrying and how heavy it is.

Ships have had to watch their weight this year, which means reducing cargo volumes. Fewer ships are going through each day; the Panama Canal Authority, which runs the waterway, has restricted the number to 32 per day now, compared with 36 to 38 at other points.

There is little rain in the forecast, which means the canal’s problems are not expected to ease up anytime soon.

Global trade is also part of the climate problem. Ships use heavy fuel oil, which accounts for roughly 3 percent of global greenhouse gas emissions. The industry recently agreed to neutralize its emissions by or around 2050, though climate advocates called the plan “vague.”

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