The world’s largest traffic jam has begun as more than 150 cargo ships are waiting their turn to pass through the Panama Canal, caught up in the shortcut craze. What’s interesting is that each ship is willing to pay the government more than $4 million just to pass through the Panama Canal. However, the authorities are not granting them permission to pass through the canal, neither is any maintenance work being carried out nor is the canal closed due to any reason. It’s a miracle of engineering that the Panama Canal, once a source of pride for the world, is now facing a major crisis, and this struggle is not with any other entity but against nature itself.
Yet again, as seen in CCTV footage, there is enthusiasm in the eyes of sailors worldwide for shortcuts. Two shortcuts have emerged for ocean vessels around the world. One is the Suez Canal built in Egypt, connecting East Asian countries like China, Japan, Taiwan, and Singapore to Europe. Similarly, if these countries’ ocean vessels need to go to East America or East Canada, or from Europe to West America, another shortcut is used, which is the Panama Canal located right at this point in Central America.
There are approximately 50,000 cargo ships in the world, and 70% of them use these two shortcuts. This means that if there is any issue with these two shortcuts, neither of which anyone desires, its impact will be felt worldwide, a glimpse of which the world has already seen when the Ever Given ship blocked the entire Suez Canal traffic for 6 days in 2021.
If something similar happens in the future, ships will have to go all the way around, which will take more time and incur extra fuel costs. This extra cost and burden will have to be borne by me and you, the users, in order to use these shortcuts, as shipping companies will have to pay hefty toll taxes to canal authorities.
They also have to bear their tantrums, but what compulsion is this after all, and why do we need the canal? Why should a ship from the United Kingdom in Europe take a route to San Francisco in the West America? Now, this ship has two routes to reach its destination. Either it will cross the North Atlantic Ocean and enter the Pacific Ocean through the bottom cape of South America, or it will use the shortcut of the Panama Canal, directly enter the Pacific Ocean, and then proceed to San Francisco. This total distance exceeds 25,000 kilometers. In this trip, the ship will have to spend 28 days and consume less than 80 million liters of fuel. In addition to the time spent by the shipping company, there will be a fuel cost of approximately $32 million in the middle. which amounts to 260 crores. The second route is directly from the United Kingdom to the Caribbean Sea and then using the shortcut of the Panama Canal, directly to the Pacific Ocean, and then to San Francisco. In the first route, where the distance traveled was 25,000 kilometers, now, using the Panama Canal, this distance has been significantly reduced to only 14,000 kilometers. In other words, due to the Panama Canal, the shipping company saves almost half of the fuel cost, which amounts to $16 million. Now you might think that passing through the Panama Canal saves more, so ships prefer to pass through here. But it is not so. Nowadays, the toll tax for a ship passing through the Panama Canal is around $400,000. Sometimes, this rate goes up to $800,000 to $1 million, and even then, the ships happily pay this amount. The biggest advantage of using the canal is time saving. If ships spend an extra 15 or 20 days on each route, it means that the ship, which operates on a route only 24 times a year, will only operate 12 times. And with fewer bookings available for them, shipping companies pay the requested amount to pass through the Panama Canal to save time. Then whether it takes 5 or 10 days to wait in line or to deal with the tantrums of the Panama Canal authorities, the issue now is that even though the Panama authorities want to allow more ships to pass through the canal, can they? Before understanding this, we need to understand how the Panama Canal works. It’s an engineering marvel. Whoever designed it was indeed a genius, but not so much that they could challenge nature. If we look at the Panama Strip, it’s a 30-kilometer-wide land strip present in Central America. It’s surrounded by oceans on both sides. A canal like the Suez Canal could not be dug here because the land here is 30 meters above sea level. Therefore, ships are first raised up to 30 meters and then brought to the level of Gatun Lake. After that, they are lowered back to the sea level on the other coast. Now, let’s talk about cargo ships, which weigh millions of tons. For lifting such heavy ships up to 30 meters, locks are installed at the opening of the canal. These locks work like stairs for ships. First, the door of lock number one opens, and the ship enters it. After closing the door of lock number one, water is filled in lock number one from lock number two. In this process, there is no need for any motor or pump because the water level in lock number two is higher, which naturally happens due to gravity. As soon as the water levels in both locks become equal, the door in the middle opens, and the ship now moves into lock number two, and the door of lock number two is closed from behind. Similarly, now water is filled in lock number two from lock number three. After both locks have equal water levels, the door in the middle opens, and the ship now moves into lock number three. After closing the door of lock number three, water from Gatun Lake is filled in lock number three. When the water level in lock number three becomes equal to Gatun Lake, the middle door opens, and the ship finally enters Gatun Lake. After traveling in Gatun Lake, it takes the ship 11 hours to reach the other coast of Panama, where there are also locks, which lower the ship back down by 30 meters to sea level. Here, it’s noteworthy that in both processes, i.e., lifting the ship up or lowering it down, water from Gatun Lake is used. The water from lock number one is left in the sea so that it can reach sea level, and this lake water, which is fresh water, is actually drained into the sea. The water from Gatun Lake is used to operate the locks of the Panama Canal and also to supply fresh water to the local population here.
The Panama Canal is used by only one ship, Lake Gatun, to consume as much water as 5 million people drink daily. Every day, 38 ships pass through the Panama Canal, which means that water equivalent to the consumption of 190 million people is discharged into the sea. Lake Gatun is a very large lake, about the size of an average city. Rainwater from the surrounding mountains flows into Lake Gatun, which replenishes the water lost due to ships passing through. 110 years ago, when the Panama Canal was built, no one imagined what would happen if there was a shortage of rainwater in Lake Gatun. Today, this issue has become a serious concern for the Panamanian government. Every seven years, there is a wave of crises in the area, resulting in significantly reduced rainfall in Panama. This crisis is becoming increasingly serious, and this year, in 2024, there was no rain, with the weather department predicting very little rainfall. Considering this situation, the Panamanian authorities have only two options left: either close the canal or provide drinking water to their people. The canal generates an annual income of $4.32 billion, which is a significant portion of Panama’s total GDP. If the canal were to close, it would affect this income, and if it were to remain open, the issue of drinking water would arise. Even installing pumps to divert seawater into Lake Gatun is not feasible because it would make operating the canal too easy, but it would also make the lake water brackish, rendering it unfit for drinking. Therefore, the government has started taking measures to conserve the water in Lake Gatun. First, they have reduced the number of ships passing through the canal from 38 to 18 per day. Second, permission to pass through the canal is only being granted to cargo ships with fewer containers. Obviously, the more weight a ship carries, the more water it displaces. Due to these measures, each ship now carries cargo loads of up to 40 percent less, and the remaining cargo is loaded onto new ships. Consequently, the total number of ships passing through Panama has increased. There is now a long line of ships outside the Panama Canal, waiting for their turn to pass. Especially those whose bookings were not made in advance are forced to wait for up to 15 days. In addition to these delays, toll taxes are being collected under the guise of fresh water surcharges, resulting in an extra 10 percent cost. This has disrupted routes from Europe to West America and East Asia via East and West America. Cargo delivery is being delayed, and advance booking for the Panama Canal is now required three months in advance, even before goods are manufactured in factories. Various proposals are being made to solve this issue, including creating the Bay of Oceania Corridor. Under this proposal, ships would unload containers at one coast, which would then be loaded onto trucks or trains and transported to the other coast, where they would be loaded onto other ships. While this option seems promising, the Andes Mountain Range stands as a barrier in the western parts of South America, spanning 9,000 kilometers and being the longest mountain range in the world. It is impossible to lay rail tracks or road networks between them. A corridor is being built in North America at a point in Mexico that is only 190 kilometers wide, with sea on both sides.
The Mexican government is investing a total of $2.85 billion to build modern ports and lay rail networks between them. The completion of this project is expected by 2030. After that, the Mexican Interoceanic Nick Corridor is expected to offer a cheaper and faster route than the Panama Canal. Once completed, an estimated 13 million containers will pass through here annually. By comparison, during normal operations, the Panama Canal sees around 26 million containers pass through annually. This means that six years after today, the Mexican Interoceanic Nick Corridor will divert half of Panama’s load towards itself. Compared to other options, Mexico’s project seems quite promising. By expanding the network, the cost-to-cost spread is being increased. However, this project will also take several years. The future of the Panama Canal is becoming increasingly uncertain globally. If the rains start again here, the canal will once again operate at its full capacity. But climate change is a reality, and fighting it may be beyond anyone’s control. In the coming times, there might be such a shortage of rains here that the canal may have to be closed permanently.
