PANAMA CITY (NEWSnet/AP) — A severe drought that began in 2023 has forced authorities to slash ship crossings by 36% in the Panama Canal, one of the world's most important trade routes.

The cuts, announced Wednesday by authorities in Panama, are set to deal an even greater economic blow than previously expected.

Panama Canal Administrator Ricaurte Vásquez estimates that dipping water levels could cost $500 million to $700 million in 2024. Previous estimates were $200 million.

One of the most severe droughts to ever hit the Central American nation has stirred chaos in the 50-mile  maritime route, causing a traffic jam of vessels, casting doubts on the canal's reliability for international shipping and raising concerns about its affect on global trade.

The combination is having effects on global trade by delaying shipments and raising transport costs. Some companies had planned to reroute to Red Sea — a key route between Asia and Europe — to avoid delays at Panama Canal, analysts say. Now, that’s no longer an option for most.

On Wednesday, Vásquez said the canal authorities would cut daily ship crossings to 24, down from 38 per day. Vásquez said that in the first quarter of the fiscal year, the passageway had 20% less cargo and 791 fewer ships than the same period the year before.

Canal authorities attributed the drought to the El Niño weather phenomenon and climate change, and warned it was urgent for Panama to seek new water sources for both the canal's operations and human consumption.

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