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9 Dec, 2023 14:48

Global trade in jeopardy amid crises at key waterways – FT

Christmas presents may not arrive on time this year due to drought in Panama and shipping attacks near the Suez canal
Global trade in jeopardy amid crises at key waterways – FT

Disruptions to the Panama and Suez canals, two of the world’s key trade waterways, are threatening global supply chains, Financial Times reported on Friday, citing ship owners and operators.

The Panama canal, a 50-mile-long (80.5km) waterway linking the Pacific and the Atlantic oceans, has been suffering from drought, which has diminished the water level and led to a reduction in the canal's throughput capacity.

Compared with 238 vessels that transversed the waterway during the first week of December 2022, this year only some 167 made it through, according to trade analysis group MarineTraffic. Many ships were forced to wait up to two weeks to transit, according to the canal authority. The bottleneck has prompted many vessels to detour thousands of miles to avoid costly delays.

That drought in the Panama Canal is a serious concern,” Rolf Habben Jansen, head of German group Hapag-Lloyd, the world’s fifth-largest owner of container ships, told FT. The company earlier announced that it would divert at least 42 of its ships away from the waterway.

Meanwhile, concerns are also mounting around the Suez canal, connecting the Mediterranean to the Red Sea. Following the escalation of hostilities between Israel and Hamas in Gaza, Yemen-based Houthi rebels launched several attacks on cargo vessels in the Red Sea, a mere 11,500 kilometers away from the conduit, in a show of support for Hamas. The attacks, allegedly only aimed at ships linked to Israel, could disrupt the canal’s operations, experts warn.

If the passage through the Suez would become more difficult [as well], that could cause serious disruptions [to global supply chains],” Hapag-Lloyd’s Jansen said. Experts note that shipping disruptions would ultimately lead to a surge in prices.

Analysts warn that the situation could become especially dire during this year’s festive season.

There are supplies that just won’t be here in time for this Christmas,” Marco Forgione, director-general of the UK’s Institute of Export and International Trade, told FT. He added that if attacks near Suez worsened, the combination of two waterways blocked simultaneously would be “catastrophic” for global commerce, and called for changes in cargo transportation.

Government and business need to be looking at what a resilient supply chain looks like… There is little that can be done for this Christmas. [But] if nothing is done, I think there is a [risk of] shortages through the course of next year,” he warned.

For more stories on economy & finance visit RT's business section

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