Strong El Niño raises concerns over Panama Canal water levels

The US National Oceanic and Atmospheric Administration (NOAA) has officially declared the onset of El Niño and expects it to strengthen in the coming months.

IMAGE: Port of Balboa at Panama's Pacific Ocean side. Getty Images.

The return of a strong El Niño weather pattern could put pressure on water levels in the Panama Canal and potentially lead to transit restrictions if drought conditions develop.

Water levels in the Panama Canal could suffer and the number of transits might be tightened, according to a trader.

Earlier this month, the Panama Canal Authority (ACP) announced a reduction in the maximum authorised draft for Neopanamax vessels from July, citing projected Gatun Lake levels and the possible development of El Niño conditions in the canal watershed.

Lars Jensen, chief executive of Vespucci Maritime, notes that strong and very strong El Niño events have historically led to significant declines in water levels in Gatun Lake, the canal's main freshwater reservoir.

“Shippers having the Panama Canal as a part of their supply chain routing should start contemplating a plan B just incase we will again see capacity restrictions,” Jensen says.

While El Niño could increase drought risks and pressure water levels in Panama, NOAA says the weather phenomenon also tends to suppress Atlantic hurricane activity, potentially reducing weather-related disruptions to bunker operations elsewhere in the Americas.

The trader adds that El Niño is unlikely to have a significant impact on bunkering operations across the region.

"I don't think it'll have a noticeable impact. More rain in the US South, but unless it is days of storms sitting over an area, it's not usually a big deal," the trader says.

By Gautamee Hazarika

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