Global Shipping Canals Threat To New Year Supply Chain

December 15, 2023

Global Shipping Canals Threat To New Year Supply Chain

 

Problems at the world’s two most important shipping canals may be the biggest threat to supply chains for the beginning of next year, and perhaps beyond.

Extreme drought on one side of the world is impacting the Panama Canal, while on the other side of the world the conflict in the Middle East has led to some ships avoiding the Suez Canal area and sailing around Africa.

The Panama Canal has been impacted by very low water levels due to drought for most of this year. Normally, around 38 vessels pass through the waterway every day, but this was reduced to 32, then 30, and now 22, with implications that there will only be 18 passages per day by February.

Major queues have formed at the entrances to the canal and over 40 voyages from the next few weeks have already been rerouted away. The drought conditions have also impacted shipping in the Amazon Basin, which also has low water levels.

A measure of the current climatic conditions in South and Central America, is that Brazil have just experienced a heatwave in November, recording temperatures as high as 46C and summer doesn’t start until the 22nd December.

The Suez Canal situation is totally different. The canal is situated less than 150 miles from Gaza and is operating as usual. However, the conflict has led to drone attacks on ships in the area, with one car-carrier reportedly boarded in the Red Sea by Houthi rebels, seized, and then diverted to Yemen.

As a direct result several vessels have been avoiding the area and travelling around the Cape of Good Hope, which adds approximately 10-12 days to their transit times.  22 voyages have been redirected so far, along with 9 additional sailings that were scheduled to travel through the Panama Canal before switching to Suez, and then eventually opting to sail around Africa.

Neither situation is currently showing any signs of improvement, which means we are entering the new year with some uncertainty surrounding the world’s major shipping canals. The Killick Martin team will be monitoring developments closely.

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