Rexroth is intimately acquainted with the Panama Canal, the waterway that links the Atlantic to the Pacific. Built early in the 20th century, the canal shaved months off of transport from the East Coast to the West Coast. It has continued to be an important part of supply chains for the United States — it handles about 6% of global trade, but 40% of U.S. container ships.
The traffic jam
Now the canal is experiencing a traffic jam. Drought conditions have left the canal with significantly less water than usual, and slots are being reduced to 18 per day from the usual 25 to 36. Tonnage matters, too, so some ships are offloading shipping containers at one end of the canal and sending the goods on by truck or train to pick them up at the other end of the canal.
Since the canal is much faster than a land crossing, even today, that can mean that the containers miss their chance to travel on the original ship and must wait for another opportunity. A backlog of ships has been reported, with ships waiting in the Pacific or the Atlantic for their turns.
Some shippers are sailing around Cape Horn, as ships had to do before the Panama Canal was constructed. This adds days to their travel time, which naturally adds to shipping costs.
A Florida company hopes to build a system using the same technology as Japanese bullet trains, under the earth in Colombia. They are far from market-ready, but they would offer an alternative to the Panama Canal.
That might be a solution for the future, especially if climate changes make drought more common in South America.
In the short term, prices might be higher this holiday season because of supply chain disruptions. American brands may look to local manufacturers to shorten and protect their supply chains.
Since petroleum products as well as consumer goods rely on the canal for transport, energy prices may also be affected in the foreseeable future.