Panama Canal congestion could add to supply chain concerns

The market has been naturally fixated on the disruption of aluminum exports from the Persian Gulf. However, there is another shipping problem that also may have repercussions on the movement of manufactured goods originating in the Pacific. That is extreme congestion at the Panama Canal.

The 51-mile Panama Canal connects the Pacific to the Caribbean, running south to north. In 2016, the Panama Canal Authority (ACP) completed a 9-year, $5.2 billion expansion, adding a third set of locks to accommodate larger, Neopanamax vessels. This doubled the canal’s capacity to between 36-38 vessels per day. However, the increased capacity has been constrained by lack of rain in the region, which severely restricted transits to as few as 22-24 vessels per day in 2024.