What will El Niño cost us?

**Hannah Malane** (0:01)
The El Niño is supersizing before our eyes.

**Celeste Saulo** (0:04)
This exceptional El Niño demands exceptional preparation and response.

**Susana Cardenas** (0:09)
Because of El Niño, the prices are beginning to rise again.

**Hannah Malane** (0:13)
It's World Business Report from the BBC World Service. I'm Hannah Malane. The El Niño means 2027 is set to be the hottest year on record. We'll look at the economic impact. And Tesla is about to reveal its long-awaited robot taxis. Would you get in one? And US basketball team, the Los Angeles Clippers, have been hit with a $30 billion fine for breaking its salary rules.
Hello, and we're starting today's program talking about the weather, specifically the news about the El Niño, a phenomenon that changes weather patterns around the world, pushing some regions into drought whilst others experience stronger typhoons and flooding. The next El Niño is supersizing before our eyes according to the World Meteorological Organization. Here's their Secretary General, Professor Celeste Saulo.

**Celeste Saulo** (1:08)
Because we live in a globalised world with a globalised economy, this El Niño will affect the food that you take every day, the water you have access to and the prices you pay for everything. And that is why we are not only warning, but calling to action in advance.

**Hannah Malane** (1:28)
It is likely to be the largest in at least 1000 years, which means 2027 is set to blow apart the record and be the hottest year ever recorded. And as Celeste says, it's going to have a big impact on the economy.
It's already having an impact on the Panama Canal, which today cut the number of ships able to pass through due to low water levels caused by the El Niño. The Panama Canal handles 5% of global maritime trade and about 40% of US container traffic. Well, Lorianne Larocco is with us. She's president of Global Supply Chain and Trade Data Firm, Larocco Consulting in New Jersey. Thanks for joining us, Lorianne.

**Lorianne Larocco** (2:05)
Thanks for having me.

**Hannah Malane** (2:06)
This seems pretty drastic. I know that you've been speaking to the administrator of the canal. What has he had to say about it?

**Lorianne Larocco** (2:13)
Well, I spoke with him just recently and he said that originally they thought the El Niño was not going to be as bad. So they were just lowering the draft. And the draft is how heavy a vessel will be.
So they were lowering the draft so you would have lighter vessels going through that would help conserve water. But he told me based on, you know, their analysis the El Niño is not only starting earlier for them, it's going to last longer. And that is the reason why they decided, they announced the reduction that started today back in August because they need to conserve the water now. But here's the thing, you know, you hit on about what's going on in the world. When you look at the water levels of Gatun Lake, and that's the main lake that feeds the canal, so vessels can go through, it is two feet lower today than it was back in 2022 ahead of the historic El Niño of 2023 and 2024 So it's very, very, it's concerning.

**Hannah Malane** (3:17)
Yeah, absolutely. And so there's less ships going through. How do they decide who gets to go through? Because surely there's so much competition now for these reduced slots.

**Lorianne Larocco** (3:28)
Well, they do have a reservation system. It's a long-term reservation system where a lot of container ships and some LNG carriers and other tankers go through, but they do leave a couple of those auction slots open. And so, you are seeing that increase, if you will, of the auction price. Like last week, it was a $4.6 million bid.
That was a record from the previous week of 5.3. What you're seeing now is all of these energy tankers because of the Strait of Hormuz. So, the United States is bringing more energy over to Asia. And so, what happens is these tankers will wait until there's a bid. And you're now having 18 bidders on a slot. Normally, they only have 2 to 3

**Hannah Malane** (4:18)
Wow.

**Lorianne Larocco** (4:18)
So, can you only imagine what it's going to be like in the coming months?

**Hannah Malane** (4:21)
Yeah, and potentially a bit of a money maker for the Panama Canal administrator if ships are willing to spend that kind of money to get through.

**Lorianne Larocco** (4:30)
Well, they do make a lot of money, but the ACP, they have told me because we've hit on it before, they tell me they make about 2 to 3% of that profit. So, it goes to the government of Panama.