Panama Canal Drought Opens Opportunities for CPKC Railroad

The Panama Canal, a vital flow of commerce, has been dealing with several challenges provoked by the meteorological phenomenon El Niño, which is altering precipitation patterns and affecting water availability in Panama. The challenges affecting this major trade channel are causing uncertainty in international markets.

About 5% of the world's maritime trade transits through the Panama Canal, according to Georgia Tech. In 2022 alone, 14,239 crossings were reported. Due to these issues, the Panama Canal Authorities issued a circular to shipping lines establishing certain temporary restrictions on the draft of vessels for all agents, owners and operators of the interoceanic waterway. These restrictions will be upheld unless significant changes occur in weather conditions.

As of July 30, 2023, the channel’s daily transit capacity has been adjusted to an average of 32 daily vessels distributed among the Panamax and Neopanamax locks. A lack of rainfall in the canal watershed, even in the rainy season, leaves the waterway facing an intense water shortage to which there may be no quick fix.

These issues are leading many, especially in the US, to look for alternative solutions. The US is the largest user of the Panama Canal, representing about 73% of Panama Canal traffic, according to CNBC. About 40% of all US container traffic travels through the Panama Canal annually representing US$270 billion in cargo. One of the main commercial routes crossing the Panama Canal is the US East Coast and Asia.

As the Panama Canal navigates these challenges, CPKC, a railway company that recently merged in March, is creating the first single-line railroad service spanning Canada, the US and Mexico. The railway will offer an alternative route for shippers and carriers. Corey Heinz, Managing Director Sales, CPKC, tells Seatrade Maritime that this railway provides direct access to the gateway Port of Lazaro Cardenas in Michoacan, Mexico, and connects it to key US markets, such as the US Gulf, Midwest, Northeast and Southeast.

Heinz says that CPKC's solution addresses the concerns of stability and transit time. Transit time from Lazaro Cardenas to Houston and Dallas is significantly shorter than to the Panama Canal, offering a competitive advantage.