Ships are damming up in front of the Panama Canal in Central America – what are the consequences? picture alliance / AA | Daniel Gonzalez
Due to low tides resulting from high temperatures, ships back up on both sides of the Panama Canal. The government in Panama has reduced the number of ships passing through and lowered the maximum draft.
The situation is reminiscent of the 2021 Suez Canal blockade, but in the case of Panama the global impact is less. The raw materials sector and maritime connections to US ports are particularly affected, experts explain in an interview with Business Insider.
For Germany and Europe there is currently no reason to worry. Most of the waiting resource ships are not destined for these regions. Important container ships are given priority.
An unusual situation is currently occurring in front of the Panama Canal: ships are damming up on both sides. The reason for this is low water due to rising temperatures and lack of rain. As early as July, the government in Panama had to reduce the number of ships that are allowed to use the waterway from 36 to 32.
Since then, the ship jam in front of the Central American country has continued to grow. The all-clear is not in sight. The exception rule recently even had to be extended until the beginning of September. In addition, the maximum draft a ship can have has been reduced. So not only fewer, but also only lighter loaded ships come through.
Ships are backing up in both the Pacific and the Atlantic. MarineTraffic
The traffic jam will therefore not be resolved in the coming weeks, but is likely to grow even further. More and more ships will have to queue and wait for permission to pass. At least 138 cargo ships were waiting for passage on Tuesday evening, Vincent Stamer, an economist at the Kiel Institute for the World Economy (ifw), told Business Insider.
Memories of the Suez Canal blockade are awakened
The situation brings back memories of the blockade of the Suez Canal in March 2021. At that time, a tanker that had an accident severely hampered shipping traffic to and from Europe. The result: the supply of electrical products from Asia came to a standstill.
However, the impact in the case of Panama is likely to be less. “In contrast to the blockade of the Suez Canal, the drought in Panama has had only minor effects on container shipping and thus on global supply chains,” says Stamer. Only nine of the ships waiting are container ships. In addition, important container ships are also given priority.
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Another 41 ships are so-called bulkers that deliver materials such as copper ore from Chile to North America. Some ships also have the destination Europe.
However, the impact on the raw materials sector is even greater. 72 of the waiting cargo ships transport oil, gas or chemical products. “The low water in the Panama Canal primarily affects maritime connections to or from ports in the United States,” explains Stamer. Because the Panama Canal is mostly used by companies from the USA who want to deliver products from the west to the east. The mineral oil and chemical industries in the US in the states of Texas and Louisiana are particularly affected.
Effects on Germany and Europe minor
The immediate consequences are therefore manageable for now. For Germany and Europe, too, this means: no reason to be overly concerned.
Thomas Puls, economist at the employer-related Institute of German Economics (IW), suspects that most of the raw material ships are not intended for Germany or Europe. “Germany and Europe are relatively unaffected, as the bulk of our trade is either through the Suez Canal with Asia or the transatlantic route with the US east coast,” he told Business Insider.
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Due to the low water, the transport time is currently increasing due to the unplanned waiting times, explains Puls. “As a result, certain transport chains now have to be rescheduled.” However, the economist currently does not see any measurable effects on Germany.
If the problem cannot be solved in the long term, the supply chains would also have to adapt in the long term, says Puls. Then the traffic could be shifted from the ship to the rail network in the USA. Some shipments by ship will then also take longer. “But noticeable consequences for Germany currently seem unlikely to me.”