The Panama Canal Authority (ACP) will invest to future droughts that have plagued the canal over the past year with a major investment, according to Freightwaves.
Dam Indio River.
The authority has proposed the Rio Indio Reservoir project to invest USD 1.6bn to dam the nearby Indio River.
After damming the river, the project will drill an 8 km long mountain tunnel connecting the newly built reservoir to Gatun Lake, which supplies water to the canal.
1,920 ports
The Panama Canal currently connects 180 maritime routes that reach 1,920 ports in 170 countries around the world, through which nearly 3% of global maritime trade passes, according to the ACP.
Key trade routes connected by the Panama Canal include trips between the U.S. East Coast and Asia and between Europe and South America. The canal employs 8,549 people.
Worst drought
Last year, the canal experienced its worst drought since 1950, with water levels dropping to their lowest point in January, almost 6 feet lower than the same month in 2023.
Gatun Lake
To alleviate the impact of future droughts, the ACP has proposed the $1.6 billion Rio Indio Reservoir project, which would dam the nearby Indio River. After damming the river, the project would drill a 5-mile mountain tunnel connecting the newly constructed reservoir to Gatun Lake, which supplies water to the canal.
15 additional ship
The Rio Indio Reservoir project, which could take five years or more to complete, could allow up to 15 additional ship transits per day through the canal. However the project has faced criticism from local farmers and communities whose land risks being flooded by the construction of the reservoir
Previous law
On July 2, Panama’s Supreme Court reinstated a previous law, which expands the boundaries of the ACP’s watershed to include 1.4 million additional acres along the canal, compared to the 741,316 acres that were managed before the ruling.
Major initiative
Vasquez said while the Rio Indio project is a major initiative for the ACP, the agency is also looking for other ways to handle future droughts.
Due to the drought, the ACP slashed the number of movements in the waterway from its normal 36 daily transits and reduced its reservation slots to as few as 18 by Feb. 1.
Larger Neopanamax
In recent weeks, enough rain has returned to the region to allow the Panama Canal to increase the number of daily transit slots for vessels back up to 36 beginning in September.
The return to 50 feet of draft in the canal is significant because the deeper channel is needed for the larger Neopanamax container ships to travel through the waterway.
Reduced draft.
Neopanamax ships hauling commodities such as liquefied natural gas and grains were forced to forgo the canal during parts of 2023 and earlier this year because of the reduced draft. Vasquez said LNG and grain ships are expected to return eventually now that water levels are normalizing.
Even though the tonnage shipped through the canal fell 1.5% in fiscal year 2023, the ACP reported revenue of $4.9 billion during the period, a 14.9% year-over-year increase from fiscal year 2022.
The forefront
“The priority of some of the water projects associated with the Panama Canal was taking second place to other critical issues in the past. Now this is very much on the forefront of the new administration,” Ricaurte Vasquez, CEO of the ACP, said
Last year, the canal experienced its worst drought since 1950. The water level dropped to its lowest point in January, almost 2.5 meters lower than in the same month in 2023.
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