By Eric Huang     Photo：Michael D. Camphin

The drought situation in the Panama Canal has garnered global attention and has had significant impacts on global trade and supply chains. The Panama Canal is a crucial waterway that connects the Pacific and Atlantic Oceans, handling approximately 5% of global trade volume each year. However, due to prolonged drought and the effects of global climate change, the water level in the canal has been steadily decreasing, resulting in navigational restrictions and reduced vessel capacity.

According to reports, the Panama Canal Authority has implemented navigational restrictions, requiring vessels to reduce their load. Container ships have had to unload containers on the Pacific side, transport them by rail to the Atlantic side, and then reload them onto ships. This has caused delays and uncertainty in the supply chain, potentially leading to increased transportation costs and commodity price hikes.

The drought situation in the Panama Canal not only affects trade but also has negative implications for local communities and the agricultural industry. With limited water supply, local communities face inadequate access to basic services, and agricultural producers are severely impacted during dry seasons, potentially leading to food shortages.

The root of the drought issue lies in global climate change and the El Niño phenomenon. El Niño is a periodic event of warming surface waters in the Pacific region, which can result in reduced rainfall and elevated temperatures. Reports indicate that Panama has experienced significantly below-average rainfall this year, and the El Niño phenomenon is expected to further exacerbate the declining water levels, intensifying the drought problem.

The drought issue in the Panama Canal highlights the importance of robust risk management and climate change adaptation for global supply chains. Manufacturers and carriers need to develop contingency plans, optimize inventory management, and seek alternative routes and reliable supply chain partners. Additionally, the international community should strengthen efforts to address climate change, reduce greenhouse gas emissions, and promote sustainable development.

In addition to the Panama Canal issue, periodic ocean warming has adverse effects on the global economy as well. Ocean warming not only affects weather patterns but also impacts economic activities worldwide. Reports indicate that the El Niño phenomenon can lead to reduced agricultural yields in multiple countries, subsequently driving up prices for commodities such as coffee, sugar, wheat, palm oil, and anchovies. Furthermore, the mineral market may also be affected, with a surge in nickel prices potentially impacting the cost of electric vehicle batteries.

Past experiences have demonstrated significant economic losses resulting from ocean warming and the El Niño phenomenon. According to studies, El Niño events can cause a global increase in non-energy prices, higher irrigation costs, and widespread impacts on agricultural supply and prices.

Therefore, addressing climate change and the El Niño phenomenon becomes a crucial agenda for global society. Governments, businesses, and international organizations should collaborate in formulating and implementing sustainable development strategies, promoting clean energy and low-carbon economic growth, reducing global greenhouse gas emissions, and tackling climate change. Simultaneously, global risk management and crisis response mechanisms should be strengthened to address the risks of natural disasters and supply chain disruptions.

The emergence of the Panama Canal and ocean warming issues serves as a reminder that climate change affects not only the environment but also poses significant challenges to the global economy and supply chains. Relying solely on the efforts of individual countries or organizations is insufficient; global cooperation and collective action are needed to address these challenges. Only through cross-national collaboration and joint efforts can we effectively respond to climate change, protect the environment, and ensure sustainable economic development.

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