Nearby reservoir levels are forecast to hit historic lows in July, prompting authorities to implement water-saving measures as well as impose surcharges and weight limits on ships traversing the key global trade route.

By Tara John and Taylor Ward, CNN

Published Jun 14, 2023 10:44 AM EDT | Updated Jun 14, 2023 10:44 AM EDT

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An “unprecedented drought” is affecting the Panama Canal’s water supply and leading authorities to impose surcharges and weight limits on ships traversing the key global trade route, according to the Panama Canal Authority. (Gonzalo Azumendi/Stone RF/Getty Images)

(CNN) — An “unprecedented drought” is affecting the Panama Canal’s water supply and leading authorities to impose surcharges and weight limits on ships traversing the key global trade route, according to the Panama Canal Authority.

Ships move through the Panama Canal through a lock system, which uses water from several freshwater reservoirs to float the massive cargo vessels overland.

But Panama is currently gripped by drought, and water levels at least one of those reservoirs – Gatun Lake – are dropping.

Lake levels are forecasted to hit historic lows in July, prompting authorities to implement water saving measures as well imposing strict draft restrictions, which is the distance between the waterline and the lowest point of the hull, in the last few months.

The lake’s dwindling water also supplies the nearby region, including Panama City.

“The climatic emergency decreed by the Panamanian National Government reinforces what the Panama Canal has been stating regarding the reality of a shortage of fresh water,” the statement read.

Much of Central America, including Panama, has been in significant drought in recent months. But the start of El Niño “could worsen” conditions, the Panama Canal authority also warned.

El Niño, a natural phenomenon in the tropical Pacific Ocean, typically brings warmer-than-average temperatures. This year, El Niño is expected to increase global temperatures, and could push 2023 or 2024 to be the warmest year on record.

The Panama Canal is a vital conduit for shipping between the Pacific and Atlantic oceans, helping vessels bypass the treacherous journey around the tip of South America, known as Cape Horn, as they largely move goods and commodities from Asia to ports on the United States’ east coast.

The canal was built from 1904 to 1914 by the United States, which had sole control over the channel across the Panamanian isthmus until 1979. The Panamanian government fully took control of the channel at the end of 1999.

Regional neighbors have sought opportunities to compete with the lucrative Panama Canal.

Nicaragua in 2014 announced the start of work on a multi-billion dollar shipping canal that aimed to rival Panama’s waterway – which has yet to materialize.

And this year, the Mexican government announced a plan to develop a corridor straddling a narrow isthmus in southern Mexico. Dubbed the Interoceanic Corridor, the plan would include a freight rail train stretching from the Pacific to the Gulf of Mexico.