The simultaneous disruptions at the Panama and Suez canals, vital for global commerce, are jeopardizing Christmas trade and supply chains as the festive season nears. This situation, reported by the Financial Times, highlights a critical challenge for international trade.
Shipowners and importers express concerns about a Panama Canal drought and attacks near the Suez Canal, approximately 11,500km apart. These issues threaten the smooth flow of goods, especially critical during the festive season.
Data from MDS Transmodal shows that over half of the container shipping linking Asia and North America was set to pass through these canals in this year’s third quarter. Their importance in global trade is thus starkly evident.
The Panama Canal faces its driest October since 1950, attributed to the El Niño phenomenon affecting global weather. Consequently, the canal authority plans to reduce daily ship crossings to 18 by February.
According to MarineTraffic, canal crossings have dropped significantly. Only 167 ships navigated the canal in the first December week, compared to 238 last year. Ships without bookings now face an average waiting time of 12.2 days, some delayed over two weeks.
This disruption is already affecting the market. Shipowners impose surcharges on containers via Panama, responding to increased canal usage costs, and escalating shipping expenses substantially.
Rerouting from Panama to Suez adds roughly five days to New York-Shanghai trips for ships at 16 knots. Avoiding the Suez Canal and taking the route around Africa’s Cape of Good Hope adds another six days, further delaying shipments.
The global industry is on high alert due to a recent Red Sea attack by the Yemen-based Houthis. Despite assurances from the Houthis that their focus is solely on ships associated with Israel, the frequency and intensity of these incidents have caused widespread concern.
All these crises in the shipping industry highlight the vulnerability of key global trade routes and their potential impact on international supply chains, particularly during high-demand periods like Christmas. The situation calls for immediate attention from global trade bodies and participants.
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