Simultaneous and separate crises are occurring at the Panama Canal and the Suez Canal simultaneously. These are the two most important global shipping canals. The Panama Canal is suffering from a drought in the lake that supplies its water. The drought is likely caused and made more severe by climate change.
The Suez Canal is experiencing a geopolitical crisis due to the Iranian-backed Houthi Militia in Yemen attacking commercial shipping vessels in the Red Sea. The Houthi attacks are a response to the Israeli military strikes on Gaza in response to Hamas’ October 7th terror attack against Israel.
The problems in both canals are resulting in supply chain delays and spikes in shipping container rates and could lead to an increase in air cargo in the medium term. It is possible that the dual canal crises could create a milder version of the supply chain problems seen during the worst of the COVID-19 pandemic.
Avoiding the Suez Canal by shipping around Africa adds up to 10 days of delay and $1 Million in fuel cost for one large container ship. War risk insurance rates have also increased for commercial shipping vessels trying to go through the Suez Canal and the Red Sea.
In the Panama Canal, reduced water levels from the drought have cut shipping traffic by roughly 40% compared with last year. More information on both canal crises is available here.
Top image of Panama Canal via Pexels.com