Panama Canal may cut ship traffic further as El Niño drought worsens

Sep 7, 2026

The Panama Canal Authority warns it may cut daily ship transits to as few as 27 vessels as a severe El Niño-induced drought depletes the freshwater reservoirs needed to run its locks. Led by new administrator Ilya Espino de Marotta, the canal has already reduced daily transits to 34, with a drop to 32 scheduled for September 15, 2026. These restrictions coincide with surging traffic as shippers seek alternatives to the blocked Strait of Hormuz, driving canal transit auction prices above $1.25 million.

Panama Canal transit restrictions

▪The Panama Canal Authority may reduce the number of daily ship transits to as few as 27 in a worst-case scenario, or to around 29 in February or March 2027, if the El Niño drought worsens.
▪The Panama Canal Authority reduced daily ship transits from 36 to 34 on September 4, 2026, with a scheduled further reduction to 32 daily transits starting September 15, 2026.
▪The Panama Canal Authority reduced the maximum draft limit for transiting vessels from 15.2 meters to 14.6 meters, forcing ships to carry less cargo to float safely.

El Niño drought impact

▪The 2026 El Niño weather pattern is projected by meteorologists to be the strongest recorded since systematic record-keeping began four decades ago.
▪The Panamanian government declared a nationwide state of emergency on August 26, 2026, due to the developing El Niño weather phenomenon.
▪Panama Canal Authority Administrator Ilya Espino de Marotta stated that climate change is increasing the frequency of dry years to approximately once every three years.

Freshwater reservoir levels

▪The Panama Canal locks rely on freshwater from the Gatun and Alajuela reservoirs, which are replenished by rainfall and have experienced dropping water levels due to El Niño.
▪Each ship transit through the Panama Canal consumes and subsequently discharges approximately 200 million liters of freshwater into the sea.
▪The Panama Canal Authority is planning a new reservoir at Rio Indio, expected to take five to six years to build, to secure long-term water supplies.

Rising shipping costs

▪Some shipping companies have paid over $1 million at auction to secure transit slots through the Panama Canal, while others are rerouting around Africa or South America.
▪Average auction costs to secure standard and larger lock transits through the Panama Canal rose from $66,150 and $253,180 in early 2026 to $478,750 and $1.25 million, respectively.

Strait of Hormuz alternative routing

▪The Panama Canal handles approximately 5 percent of global maritime trade, including around 40 percent of all container traffic from the United States.
▪Shippers are increasingly using the Panama Canal as an alternative route for energy shipments because Iran has blocked the Strait of Hormuz in retaliation for the US-Israel war.

Debatable claims

▪Panama should prioritize domestic water access over canal transits during droughts
▪The Panama Canal's transit auction system unfairly disadvantages smaller shippers
▪The Panama Canal's freshwater-reliant lock system is ecologically unsustainable