Impact of Reduced Ship Crossings in the Panama Canal on Global Supply Chain

12/9/20232 min read

white red and blue star flag
white red and blue star flag

According to a recent report by Reuters, the Panama Canal is set to slash the number of ships passing through its waters, which will have a significant impact on the global supply chain for critical goods and supplies, including PPE and nitrile gloves. The authorities managing the canal have announced this reduction in ship crossings due to a severe drought, leading to increased shipping costs.

The Panama Canal, known as one of the world's main maritime trade routes, plays a crucial role in facilitating the transportation of goods between the Atlantic and Pacific Oceans. However, the severe drought affecting the region has forced the Panama Canal Authority (ACP) to take measures to conserve water and ensure the sustainability of the canal's operations.

Starting from November 3rd, the number of booking slots for ships passing through the canal will be reduced to 25 per day, down from the already reduced 31 per day. This reduction will gradually continue over the next three months, with the number of slots further decreasing to 18 on February 1st, 2023.

The impact of these reduced ship crossings in the Panama Canal is expected to be felt throughout the global supply chain. With fewer ships able to pass through the canal, there will be delays in the transportation of goods, leading to potential disruptions in the availability of critical supplies. Industries heavily reliant on the Panama Canal for their supply chain, such as the automotive, manufacturing, and retail sectors, may face challenges in meeting customer demands and maintaining efficient operations.

Additionally, the reduction in ship crossings is likely to result in increased shipping costs. As supply chains are forced to find alternative routes or modes of transportation, the additional expenses incurred may be passed on to consumers, leading to higher prices for goods and services.

Companies involved in international trade will need to reassess their supply chain strategies and consider alternative routes to mitigate the impact of the reduced ship crossings in the Panama Canal. This may involve exploring other shipping lanes, utilizing intermodal transportation options, or increasing inventory levels to buffer against potential disruptions.

While the authorities managing the Panama Canal are taking necessary steps to address the water shortage and ensure the long-term sustainability of the canal, the impact on the global supply chain cannot be ignored. It is crucial for businesses to stay informed, adapt their operations, and collaborate with their supply chain partners to navigate through these challenging times.

In conclusion, the reduction in ship crossings in the Panama Canal due to a severe drought will have far-reaching consequences on the global supply chain. The delays in transportation, potential disruptions in supply, and increased shipping costs highlight the need for businesses to be proactive in managing their supply chain operations and exploring alternative solutions.