Canal drought crisis  could raise cost of merchandise – Moody’s

 
1,496Views 0Comments Posted 01/09/2023

 

Moody's Investors Service in a recent report, pointed out that the low water levels in the Canal have led to restrictions on the passage of ships, which have generated immediate effects, such as the increase in the cost of certain imported goods and other products.

If the restriction is prolonged, Moody's estimates that the prices of transportation, grains, oil, liquefied gas, and petroleum products will become more expensive. Even more so since the ships are carrying less cargo, which could translate into a slight interruption in the supply chain.

 “Average waiting times to transit the Canal have increased, with oil tankers and bulk carriers being the most affected. We believe in the prospect that if the restrictions continue for an extended period, transportation prices and availability of grains, petroleum products, liquefied natural gas, and certain chemicals will increase,” the report reads.

Although the restrictions could affect the global supply chain, the rating agency believes that the United States (USA) could be more affected by exports of raw materials and goods that go to the East Coast and the Gulf of Mexico, such as cereals, oil, and gas, as well as imports of goods from Asia to the US

“A prolonged absence of rain in Panama would also cause supply chain disruptions in the United States, similar to those experienced after the pandemic

According to Moody's, water levels in the Panama Canal have remained critically low for the longest stretch on record, a record that leads to ongoing shipping restrictions. For this year, the return of the El Niño phenomenon has exacerbated the effects of climate change, causing an unprecedented crisis.