When you hear of the largest traffic jam, you must be imagining cars, buses, and trucks waiting on a road for hours or days. But what if the largest traffic jam in the world is not on the road? Yes, you heard it right. It is in the sea. More than 200 ships are waiting at the Panama Canal to cross with an average waiting time of 21 days!
How does the Panama Canal work?
Panama Canal was built to cut short the distance from the Atlantic to the Pacific oceans and hence save the time and costs for the ships. With this nearly 80km canal, ships skip the encircling around the whole southern American continent. To give a context, a ship from New York to San Francisco sails 8370 km through the canal as opposed to the 20,900km route around the Cape Horn traveling around South America.
The canal works on multiple locking and unlockings. As the Pacific Ocean is at a higher altitude than the Atlantic Ocean, a ship entering from the Atlantic has to go up the sea level to finally reach the Pacific. The canal is watered by the freshwater Gatun Lake.
The way it works is when a ship enters the canal from the Atlantic one of the three locks is filled with freshwater to raise its height. This is repeated two more times until the ship reaches the altitude of Gutan Lake. It then travels through the Gutan Lake until the altitude is finally lowered with the help of locks and it reaches the Pacific. One ship crossing uses around 190 million liters of fresh water from Gutan Lake and it is released into the ocean.
Why is the huge traffic?
Because of drought. The source of water for successfully passing a ship to either side is from the Gutan Lake. But the Central American region is facing one of the worst draughts in recent years. Like the other parts of the region, the source of freshwater is from the rains. The Gutan lake gets the water from the Chagres River and its smaller affluents, on which it is dammed, which depend on the rains.
With fewer rains, the water level of the Lake is decreasing. As it’s the only source of water and give the water level decreasing, the number of daily ship crossings has hence been reduced than normal. As of mid-September, 32 ships are allowed to pass each day which is less than the normal of 36 ships per day. This has led to the change of container ship equations and led to the traffic.
What is the cost of this?
Shippers pay a hefty amount to pass through the Panama Canal. During normal times, the fees that have to be paid to cross the canal are anywhere between $150,000 to more than $1 million. This is dependent on the size of the ship.
Many shippers book the canal for transit well in advance. The canal has now limited the advance bookings and some shippers have opted to pay extra amounts to skip the line of waiting. A shipper paid $2.4 million on top of its transit fee to skip the line!
The economic impact would be most felt by the United States, as 73% of the total traffic is from or towards the United States. This accounts for $270 Bn in value. Imagine $270Bn worth of goods delayed to the market! This would possibly result in a rise in prices. The shipping companies are in a huge loss because of the loss of time and money.