The Panama Canal Drought and World Trade
The Panama Canal runs on rain. Every ship is lifted up to a lake of fresh water in the middle of the country and lowered back down to the sea, and the water that does the lifting runs out to sea with it. This video explains how that works, why it was built that way, and what happens when the rain fails, as it did in 2023 and again in 2026.
The French began a sea-level canal in 1880 under Ferdinand de Lesseps, builder of Suez. Disease and the terrain defeated them; the Panama Canal Authority records that by May 1889 all activity on the isthmus had ceased. The United States began work in 1904 and took a different approach: dam the Chagres River, lift ships about 26 metres to Gatun Lake, and lower them on the other side. The canal opened on 15 August 1914.
No pumps are used. Locks fill and drain by gravity alone, and the authority has put the fresh water used in each transit at 52 million US gallons, about 200 million litres. The larger Neopanamax locks, opened on 26 June 2016, reuse 60% of their water in side basins. The same lake supplies drinking water to millions of Panamanians.
The canal authority says nearly 3% of global seaborne trade passes through, on 180 routes to 1,920 ports in 170 countries. In 2023 a dry year forced it to cut daily transits from 36 to as few as 22, and to limit ships in the larger locks to 44 feet of draft; more than 160 ships were waiting in August 2023 (US EIA). Limits were lifted by September 2024.
In 2026 El Nino brought drought back. The canal authority cut daily slots to 34 on 3 September and 32 on 15 September 2026, and the draft in the larger locks to 48 feet.
The video also covers the 1977 treaties and the 1999 handover, the 2026 Supreme Court ruling on the Balboa and Cristobal port concession, and the planned Rio Indio reservoir: estimated at USD 1.5-1.6 billion, with construction reported to start in 2028 and about 2,000 people facing resettlement.
Part of the chokepoints series, with Hormuz, Suez and undersea cables. Sources are named and dated on screen.
Educational documentary. Not financial or investment advice.
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Primary sources
- Panama Canal Authority (ACP), 'Panama Canal Adopts Additional Measures to Address Reduced Precipitation in the Canal Watershed', 20 August 2026 - Neopanamax slots 9 and Panamax 25 from 3 September 2026; Panamax 23 from 15 September; Neopanamax draft 14.63 m (48.0 ft) from 2 September.
- ACP, 'Panama Canal, Smithsonian and IMHPA Analyze the Impacts of El Nino', 11 September 2026 - quotations from Luis Rovira and Steve Paton.
- Reuters (Elida Moreno), 'Panama Canal finds its water solution, but it's 5 years away', 7 September 2026 - quotation from administrator Ilya Espino de Marotta; Rio Indio to secure water for 50 years for over half the population and the canal; five to six years to complete.
- ACP, 'History of the Panama Canal' and 'The French Canal Construction', accessed 22 September 2026 - first spade 1 January 1880; first team landed at Colon 29 January 1881; over 19,000 employed in 1884; 'by May 15, 1889, all activity on the Isthmus ceased'; US construction from 4 May 1904; opened 15 August 1914 (SS Ancon); length about 80 km; Gatun Lake 26 m above sea level.
- ACP, 'Design of the Locks', accessed 22 September 2026 - 'Water lifts ships 85 feet above sea level to the surface of Gatun Lake, floats them across the Continental Divide and lowers them again to sea level in the opposite ocean'; 'No pumps are used at the Panama Canal, the water does its work by force of gravity alone'; Gatun three steps, Pedro Miguel one, Miraflores two.
- ACP, statement, 7 March 2002 - 'Vessels transiting the Panama Canal use 52 million gallons of fresh water in every transit.'
- ACP, first water-saving basin filled, 5 February 2016 - three basins per chamber reuse 60% of the water per lockage. ACP, inauguration of the expanded canal, 26 June 2016 - COSCO Shipping Panama, 9,472 TEU, 299.98 m.
- ACP, 'Celebrates 110 Years of Trust and Progress', 20 August 2024 - nearly 3% of global maritime trade; 180 routes, 1,920 ports, 170 countries; Neopanamax draft 50 ft from 15 August 2024. 36 daily transits from 1 September 2024 (PortNews, 17 August 2024, quoting ACP).
- ACP, Annual Report 2025 - main routes US East Coast to Asia.
- US Energy Information Administration, Today in Energy, 31 October 2023 - daily transits cut to 32 on 30 July 2023; over 160 ships waiting in August; Neopanamax waits of at least 17 days; the Houston-Chiba quotation.
- ACP, 15 December 2023 - 22 daily transits (6 Neopanamax, 16 Panamax); planned cuts to 20 and 18 replaced by an increase to 24 from 16 January 2024.
- US Bureau of Transportation Statistics, data spotlight on the Panama Canal - Neopanamax draft restricted to 44 ft against a normal 50 ft in 2023.
- Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal, Washington, 7 September 1977, Article I. ACP history - handover 31 December 1999.
- The White House, 'The Inaugural Address', 20 January 2025 - quotation on the Panama Canal.
- Seatrade Maritime, 30 January 2026 - Supreme Court declares the Panama Ports Company concession unconstitutional; APM Terminals (Maersk) interim operator. IISD, 21 April 2026 - USD 2 billion ICC arbitration claim.
- ENR, 24 August 2026 - Rio Indio USD 1.6 billion; programme manager RFQ; construction 2028, operations 2031. Mongabay, June 2026 - USD 1.5 billion; about 2,000 people in 38 communities to be resettled; protests.
Not regulated financial advice.