Waterways have always played a crucial role in transportation, offering a cost-effective and environmentally friendly means of conveying heavy or bulk commodities like coal, steel, mineral oil products, chemicals, and capital goods. The occurrence of seasonal and temporary low water levels in rivers and lakes, often influenced by phenomena like El Niño, is not a novel phenomenon. However, the dynamics of inland freshwater connections are undergoing a transformation. Global shifts in weather patterns, including increased rainfall and prolonged droughts, are becoming more pronounced due to climate change.
The previous year ranked as the sixth warmest since the commencement of global records in 1880, marking a trend where the ten warmest years have all occurred since 2010. As we move into 2023, indications suggest a continuation of this pattern. Various regions worldwide, including parts of the Southwestern and South Central US, Chile, Southern and Western Europe, and North Central China, experienced below-average annual precipitation in the preceding year. This resulted in desiccated soil, reduced streamflow, and groundwater levels.
For instance, in Europe, the Rhine, a vital global waterway, witnessed water levels below 135cm at the Kaub gauging station in Germany for 154 days in 2022. This figure is crucial for the navigation of large container ships on the river, and it has been on an upward trend. The outlook for the Rhine is bleak, given its dependency on meltwater, which is diminishing rapidly. Swiss glaciers, the source of the Rhine, have lost 10% of their ice volume in just two years, leading to increased volatility in water volumes and a general downward trend in averages.
In addition to significant navigable rivers such as the Mississippi, Yangtze, and Amazon, the Panama Canal, a vital international waterway, has faced severe drought conditions in 2023. The canal, spanning 80 kilometers and connecting North and South America, serves as a crucial trade route for goods between Asia and the east coast of the US, handling about five percent of the world’s total trade volume annually. Due to its design as a lock system, each ship passing through the canal requires approximately 200 million liters of fresh water, equivalent to the household water consumption of 4,500 Europeans.
Low water levels pose challenges, resulting in reduced ship capacity, surcharges, increased transportation costs, and delays. Presently, the Panama Canal is only navigable with reduced ship weight and limited ship numbers, allowing only 31 ships per day instead of the usual 36-38. These pass-through restrictions are anticipated to persist until mid-2024. Additionally, a depth limitation for vessels (44 feet or 13.5 meters) contributes to lower loading capacity. Despite challenges like excess capacity and sluggish world trade growth, there are some signs of improvement in Asia-US container spot rates.
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