Christmas supplies are at risk as a worsening drought in the busy Panama Canal route causes major shipping delays.
Dozens of ships crossing the canal connecting the Atlantic and Pacific oceans have been made to wait for up to several weeks as the route faces its worst-ever drought on record, with water levels dipping to their lowest since the mid-1950s, according to the Panama Canal Authority.
The country’s authorities have reduced the daily transit capacity to only 22 vessels per day since the start of December (compared to 32 in July), prompting fears that deliveries of food, electronics and toys to the UK and the rest of Europe could be severely delayed.
“Delays like this ripple across the whole supply chain, which is concerning for both businesses and consumers during the busiest retail period of the year,” said the Institute of Export & International Trade (IOE&IT) director general Marco Forgione.
“If vessels miss scheduled port stops due to delays, products will need to take longer alternative routes to reach their final destinations.
“This could lead to gaps on shop shelves, impacting everything from Christmas stockings to the traditional festive lunch, leaving families short of essential items.”
Forgione said the commercial impact on businesses “will also be significant if fresh produce is spoiled and wasted, delivery deadlines are missed, and cargo is stuck in ports – not just retailers, but the firms entrusted with shipping these goods as well”.
Overloading cargo and rerouting options are being explored to “help ensure everyone’s Christmas favourites make it to our supermarket shelves and homes on time”, he said, as food and consumer goods carriers have been forced to sail thousands of extra miles to make deliveries.
There have also been reports of shippers paying millions of dollars to skip the line.
The Panama Canal employs a system of locks and compartments with gates to lift ships from sea level to Gatun Lake's elevation, allowing them to traverse the Continental Divide.
— Visionaledge (@Visionaledge) December 5, 2023
📹 : Lesics pic.twitter.com/neZYbpHLs1
Retail leaders warned last month that they expected supply chain disruptions in the lead up to Christmas to affect their holiday sales.
American retailers in particular flagged the Panama Canal congestion as one of the main threats to supplies, according to a Coupa survey last month.
As one of the world’s key trade routes, any delays for ships passing through the Panama Canal could have significant and far-reaching ramifications for the entire globe.
The backlog issue is expected to last into the new year, with the Panama Canal Authority warning it could keep some restrictions in place until at least 2028.
In normal conditions around 38 ships are allowed to cross the 40-mile long route each day, but that number has shrunk to 22 since the start of the December. Authorities have also warned booking slots will fall to 20 per day from January 1 2024, and then again to 18 per day from February 1 2024.
Shipping company Maersk said it had been “closely monitoring the situation” and “thus far are able to continue making and securing timely canal transits to support our customers”.
“We continue to adapt our internal processes to match the updated booking requirements of the Canal, securing access to the transit slots needed to ensure minimum impact on our customers,” it said.
The water levels in the canal are also set to worsen as the El Niño climate phenomenon brings drier conditions to the area, experts have warned.
Read more: Food apocalypse? How climate events will drive food price hikes
Forgione said the only way to reduce the likelihood of the current level of congestion happening again in the longer term would be to “hold extra water in reserves around the canal to better control the water levels.” However, this would require further dredging of the canal or even the construction of another dam, both of which would be “massive infrastructure projects, so are not changes we could expect to see happen overnight”, he said.
“Situations like this highlight the vulnerabilities in our UK supply chains and the need for solid strategies to be in place in order to minimise the impact of future disruptions,” he added.
Forgione called on the UK government to introduce a formal import strategy that sets out a diverse supply chain so that Britain is not overly reliant on one route for imported goods.
This will “help to mitigate the impact of delays such as those we are currently seeing in the Panama Canal”, he said.
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