The Panama canal, one of the world’s most important maritime trade routes, is preparing to reduce the number of ships allowed to pass through each day as severe drought lowers water levels in the artificial lakes that supply the waterway. The drought, intensified by the El Niño climate pattern, is creating new concerns about global shipping delays, higher transportation costs, and the long-term reliability of the canal.
Beginning September 3, daily vessel transits will fall from 36 to 34, according to the Panama Canal Authority. From September 15, the limit will be reduced further to 32 ships per day. The restrictions are necessary because rainfall in the canal region between May and August was 34% below the historical average. Authorities warn that El Niño, which raises Pacific Ocean surface temperatures and alters rainfall and wind patterns, could cause conditions to deteriorate further.
The economic consequences could be significant because the Panama canal handles approximately 5% of global maritime trade and around 40% of US container traffic. Shipping companies frequently use the route because it shortens journeys between the Atlantic and Pacific, reducing fuel costs and transit times. The waterway is particularly important for retailers and energy companies moving goods between the United States, China, and other Asian markets.
Water shortages have already forced canal authorities to introduce conservation measures, including restrictions on the maximum draft of large vessels. Similar problems occurred in 2023, when extremely low lake levels forced officials to reduce daily transits from 38 ships to just 22. The resulting bottlenecks left vessels waiting to cross and encouraged shipping companies to investigate alternative routes.
The latest restrictions are expected to increase waiting times, particularly for ships without reservations. About 90% of vessels passing through the Panama canal reserve their transit in advance, while remaining spaces can be auctioned. Competition for these limited slots can become extremely expensive. Before the Iran war, the average winning auction bid was about $135,000, but one shipping company reportedly paid $4 million for a transit slot in April.
Authorities have warned that additional restrictions could be introduced if rainfall remains insufficient. The canal’s major users include the United States, China, Japan, Chile, and South Korea, meaning prolonged disruption could affect international supply chains across several major economies.
The drought also creates challenges beyond international trade. The lakes supplying the canal provide drinking water to roughly half of Panama’s 4.2 million residents, forcing authorities to balance shipping requirements with domestic water security. With El Niño potentially becoming one of the strongest events on record, conditions across Central America are increasingly concerning. Honduras has already placed 80% of its territory under drought alert. Continued dry weather could therefore place even greater pressure on the Panama canal, regional water supplies, and global shipping networks.
https://www.theguardian.com/world/2026/aug/21/panama-canal-reduce-shipping-el-nino-drought