Supply Chain Trouble At Global Shipping Canals

December 15, 2023

Supply Chain Trouble At Global Shipping Canals

 

Trouble at the world’s two most important shipping canals is likely to be the biggest threat to supply chains for the first quarter of next year, and perhaps beyond.

Severe drought on one side of the world is affecting the Panama Canal, while on the other side of the world the geo-political tensions in the Middle East have led to some ships avoiding the Suez Canal area and sailing around Africa.

The Panama Canal has been affected by low water levels due to a record drought for most of this year. In normal conditions around 38 vessels pass through the waterway each day, but this was reduced to 32 earlier in the year, then 30, and now 22, with suggestions this will be just 18 passages per day by February.

Large queues have been forming at the entrances to the canal and according to a recent report over 40 voyages from the next few weeks have already been rerouted away from the canal. The drought has also impacted shipping through the Amazon Basin, which also has very low water levels and there is little sign of the situation improving.

A good indicator of the current climate conditions in parts of South America and Central America, is that Brazil experienced a heatwave in November, recording temperatures as high as 46C and that’s before summer starts on the 22nd December.

The situation for the Suez Canal is completely different. The canal, which is situated less than 150 miles from Gaza, is operating normally, but the conflict has led to drone attacks on cargo ships in the region, with one car carrier boarded in the Red Sea by Houthi rebels, seized, and then sailed to Yemen.

As a result some vessels have been avoiding the area and sailing around the Cape of Good Hope in South Africa, which adds around 10-12 days transit to an East-West voyage. The latest information we have is that 22 voyages have been rerouted so far, along with 9 further sailings that were scheduled to transit the Panama Canal before switching to Suez, and then subsequently opting to sail around Africa.

With neither situation showing any short-term sign of improvement, we will be entering the new year with uncertainty surrounding both of the world’s major shipping canals. The Atlantic Pacific team will be monitoring the developing situation closely.

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