El Niño drought will spike costs, reduce imports through Panama Canal into 2027

Last Updated on Thursday, 10 September 2026, 22:26 by Writer

The Caribbean Private Sector Organisation (CPSO) says importers and governments across the Caribbean Community (CARICOM) need to plan for higher landed costs and thinner inventories because the prolonged El Niño drought is seeing fewer cargo ships passing through the Panama Canal.

The CPSO is urging importers to engage carriers and logistics providers now on routing, surcharge exposure and inventory planning for the fourth quarter of 2026 and the 2027 dry season.

The organisation says it continues to advance the region’s connectivity agenda with CARICOM leaders, the World Bank’s Caribbean Reconnect Programme, and support to the regional ferry service initiative now before the Caribbean heads of government.

In a statement, the CPSO, which is an associate institution of CARICOM, says its preliminary analysis shows that between US$8 billion and US$10 billion of the region’s annual imports—roughly one quarter to one third of the region’s non-fuel import bill—are exposed to the transit restrictions now taking effect at the Panama Canal.

The CPSO says the Panama Canal Authority’s Advisory A-29-2026 caps daily transits at 34 vessels for booking dates from 4 September, falling to 32 from 15 September.

The organisation suggests that is because rainfall in the canal watershed has run 34% below the historical average from May through August, with inflows 44% below.

The private sector body says the Panama Canal Authority has warned that the expected intensity of the 2026 to 2027 El Niño effect could further reduce water availability during the next dry season, from January to April 2027.

“The cost signals are already visible,” the CPSO says.

Giving some actual figures, the CPSO said a priority auction slot recently fetched US$5.3 million, reported as the highest bid ever recorded, and CMA CGM (Compagnie maritime d’affrètement – Compagnie générale maritime), MSC (Mediterranean Shipping Company) and Hapag-Lloyd have each announced per-twenty-foot equivalent unit (TEU) surcharges on canal-dependent routes, with further increases expected as draft limits tighten.

“Auction premiums and low-water surcharges do not stay on the carriers’ books,” Dr. Patrick Antoine, Chief Executive Officer and Technical Director of the CPSO was quoted as saying in his organisation’s statement.

“They are passed down the chain to importers, to distributors, and ultimately to the Caribbean consumer. When slot scarcity forces carriers to reroute or rationalise port calls, small Caribbean markets are typically the first to lose frequency and the last to regain it.”

CARICOM economies are among the most import-dependent in the world, and the CPSO says food, manufactured goods and construction inputs reach regional shelves largely on transshipment networks routed through or priced off the Panama Canal.

The CPSO estimate covers both cargo transiting the Canal directly, between US$4.5 billion and US$7 billion a year, and Canal-transited cargo consolidated through United States ports before onward shipment to the Region.

According to the CPSO, the risk to consumers is twofold: availability, through longer lead times and thinner inventories, and price, as surcharges and longer voyages feed into landed costs.

“The Canal is not the only constraint. With shipping through the Strait of Hormuz also disrupted, two of the world’s critical maritime trade corridors are under pressure simultaneously, one by climate and one by conflict, lifting freight rates, war-risk premiums and fuel costs globally. For petroleum-importing CARICOM states, that compounds pressure on electricity, transport and food prices at the same time,” says the CPSO whose membership is comprises private sector entities operating in the CARICOM space, including micro-, small- and medium-sized enterprises (MSMEs).

The CPSO presented its derisking CSME imports methodology to the CARICOM Heads of Government Breakfast Meeting in Saint Lucia in July 2026.

The framework maps the Community’s exposure to extra-regional supply shocks and identifies, product by product, where intra-regional production and alternative supply corridors can substitute for vulnerable long-haul imports.

“Every percentage point of import demand we can shift to regional supply is a percentage point insulated from canal auctions, low-water surcharges and chokepoint conflict,” Dr. Antoine said.

“Regional resilience is not built during a crisis. It is built before one.”