Extreme Drought at the Panama Canal Impacts Semiconductor Supply
This winter, the Panama Canal will experience just half its usual traffic as officials recently decided to reduce ship transits in response to an ongoing drought that has been plaguing the region. Last month was the driest October in the famed history of the canal, which sees approximately . Under normal conditions, the canal handles around 40 transits per day. However, daily transits will be decreased to 25 this month and will be lowered further in following months; officials are planning to lower daily transits to a mere 18 ships in February 2024. Supply chains are feeling this stress as travel times are being affected.
U.S. and Panama Semiconductor Partnership
Earlier this July, the United States and Panama announced a partnership that would enhance global semiconductor supplies, benefiting both countries under the U.S. Chips Act. According to Panama’s Minister of Trade and Industry, Federico Alfaro Boyd, this deal would have Panama serve as a middle point between U.S. semiconductor manufacturers and their final destinations. With recent delays at the Panama Canal caused by the drought, the partnership between the U.S. and Panama will be closely examined as the two countries were in beginning stages of “[reviewing] Panama’s current semiconductor ecosystem, regulatory framework, and workforce and infrastructure from state-of-the-art-technology.”
Supply Chain Route Disruption
Ships traveling through the Panama Canal have experienced bottlenecking as a result of the reductions caused by the drought, increasing travel time by “three to six days,” according to U.S. News. As daily transits continue to be reduced, travel times will surely increase. Unforeseen natural occurrences tend to disrupt supply chains and is Another recent example of a canal being disrupted, severely impacting supply chains, is when the Suez Canal was blocked in 2021. In this situation, a large container ship got stuck sideways in the canal. This disruption halted around in trade over the six days it was obstructed. These disruptions serve as harsh reminders of how important it is to build a resilient supply chain.
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