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A traffic jam in the drought-stricken Panama Canal may affect global supply chains

AILSA CHANG, HOST:

Many of the biggest supply chain issues from the peak of the pandemic are now behind us, but a snarl at the Panama Canal is providing a new test for global supply chains. Wailin Wong and Paddy Hirsch from Planet Money's The Indicator podcast explain.

PADDY HIRSCH, BYLINE: Let's say you wanted to get a container ship from Asia to the east coast of the U.S. Now, you could go around the tip of South America, but that is a lengthy journey. Nathan Strang is director of ocean freight at Flexport, a logistics company.

NATHAN STRANG: Longer means more money 'cause you have to burn more fuel. It's also more dangerous.

WAILIN WONG, BYLINE: And so the preferred route is to go across Central America via the Panama Canal. Today, more than 270 billion dollars' worth of stuff, from Brazilian soybeans to Chilean wine, make this journey.

HIRSCH: And here's how these soybeans and wine get to their destinations. The canal itself is a lock system that's arranged kind of like a water staircase. Ships come into the canal at the bottom step, and water enters to float ships on to the next level.

Lifting ships through the lock system requires millions of gallons of water at each step. And even though the canal is bookended by oceans, it actually doesn't use seawater for this gravity-powered system. It uses fresh water from artificial lakes.

WONG: And this is the source of the headache at the Panama Canal. Right now is the region's rainy season, which means rainfall should be replenishing the freshwater in those lakes. But instead, Panama is experiencing its driest year on record since 1950.

HIRSCH: And that means there's just not enough water to float as many ships up and down that water staircase. The Panama Canal Authority - that's a government agency - has cut back on the number of vessels that can go through each day. And now, well, there's a wee bit of a traffic jam.

WONG: Right. So under normal circumstances, there's usually about 90 ships waiting in line. Now it's more like 125. Even with that increase, though, disruptions to U.S. consumers have been minimal so far.

HIRSCH: But we've all seen what can happen when small problems in the global supply chain spiral into these big, expensive blockages. Alex Rodrigues is a supply chain lecturer from the University of Tennessee.

ALEX RODRIGUES: It's not like we have slacks everywhere. So any type of disruption becomes extreme chokepoint.

WONG: The capacity is constrained, Alex says, because the entire maritime shipping industry is racing to keep up with increased global trade. Container ships have gotten bigger. Bulk carriers have gotten bigger. But when pieces of crucial infrastructure run into trouble, like the Panama Canal is experiencing now, the vulnerabilities of the entire system become apparent.

RODRIGUES: In the case of the Panama Canal, I would say that they're always trying to play catch-up. There's always bigger ships than the canal can service.

HIRSCH: And right now, the biggest ships are the ones that are struggling the most to make it through.

WONG: Wailin Wong.

HIRSCH: Paddy Hirsch, NPR News.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Wailin Wong
Wailin Wong is a long-time business and economics journalist who's reported from a Chilean mountaintop, an embalming fluid factory and lots of places in between. She is a host of The Indicator from Planet Money. Previously, she launched and co-hosted two branded podcasts for a software company and covered tech and startups for the Chicago Tribune. Wailin started her career as a correspondent for Dow Jones Newswires in Buenos Aires. In her spare time, she plays violin in one of the oldest community orchestras in the U.S.
Paddy Hirsch