The Panama Canal is operating with draft restrictions due to a severe drought related to El Niño last week. The last five months have been the driest dry season in the history of the canal. Water levels on Gatun Lake and in the New Panamax locks are dropping. Since April, vessels transiting the New Panamax locks are restricted to drafts less than 44 feet. A further restriction of the maximum drafts to less than 43 feet was to go into effect, but it has been postponed. To comply with the draft restrictions, carriers have reduced their cargo stowage.
We asses that regular cargo shipments that transit the Panama Canal are likely to be further delayed as Panamax and New Panamax ships will have to transit the canal with smaller cargo loads. Unless the region receives significant rainfall that would recharge the water levels in the next month or two, it is highly likely that carriers will have to restrict or roll bookings to meet the maximum draft requirements. As the current draft restriction is the fifth since the beginning of 2019, it is likely that further reductions will occur in the medium term. In June, it is highly likely that vessels arriving at the canal locks with drafts exceeding the limit will be required to trim or off-load cargo. Advisories to Shipping, on the Canal's website, informs clients promptly of any further adjustment, as to permit them to plan accordingly.
Last week, at least 29 tornadoes struck across Oklahoma, Kansas, Missouri, and Illinois states in the Unites States along with heavy rainfall, large hail, strong winds, and severe thunderstorms. At least three people died and nine were injured in Missouri, and a strong tornado demolished portions of the state capital; no deaths occurred, but first responders took at least 20 residents to local hospitals. In Illinois, Indiana, Michigan, and Ohio, severe straight-line winds damaged structures, downed trees and powerlines, and caused power outages. Reports of large hail in Missouri, and Illinois described hailstones as large as 3 inches in diameter, which shattered vehicle windshields and windows of buildings, and damaged structures and roofs. Heavy rains caused localized flooding across the affected regions. The National Weather Service has forecast that the severe weather will continue.
We find it highly likely that the ongoing severe weather this week, and the destruction caused by it, will impact business operations and workforce availability in the affected regions, as well as the interstate transportation corridors and airport flight operations in the short term. Fallen trees, floodwater, and debris are blocking roads causing delays, and it is likely that cellular communications are limited in some areas hit by tornadoes. Additionally, regional power companies are responding to damaged power distribution systems; but with further storms and tornadoes likely during the evening and overnight hours slowing their progress, power lines likely will remain down for several days in some areas. Further, in the immediate term, local authorities have prioritized rescue and search missions. We find it likely that hazardous conditions will continue affecting clients with operations in the Plains and the Midwest regions in the U.S. as weather reports forecast intense storms with rainfall, strong winds, and flash flooding in the upcoming days. These circumstances will impact the agricultural sector as the recurrent flooding has delayed spring planting in large portions of the Midwest and Plains regions. Unless directly engaged in search and recovery efforts with state authorities, we recommend that clients unaffected by the severe weather avoid entering high-damage zones to keep areas clear for emergency responders.