While it may be true that all boats float in a high tide, problems in two of the world’s major ports, the Suez Canal in Egypt — plagued by the growing conflict in the Middle East — and the Panama Canal, challenged by an extended drought, are helping to tangle an already troubled global supply chain.
Recently, ocean vessels entering the Red Sea on their way to the Suez Canal have been attacked by missiles and drones by Yemen-based Houthi militia. As a result, many carriers are attempting to circumvent the Red Sea to protect both their employees and their assets.
These attacks are continuing to threaten an already fragile global supply chain, particularly for shipments from Asia and the Indian subcontinent to Europe and the U.S. East and Gulf Coasts.
What we’ve seen to date as a result include extended shipping delays and much longer transit times, a major disruption of vessel scheduling and, of course, inflated costs to both carries and shippers.
Below, is a list of actions a few of the major shippers have initiated as a response:
|Told all Maersk vessels in the area bound to pass through the Bab al-Mandab Strait to pause their journey until further notice
|Emergency Risk Surcharge, effective Jan. 8, 2024
|Rerouting several vessels from their intended route through the Cape of Good Hope
|Several surcharges: A Red Sea surcharge, effective Dec. 20, and a contingency surcharge effective immediately
|Rerouting vessels away from the Suez Canal and the Red Sea using the Cape of Good Hope
|War Risk Surcharge, effective Jan. 1, 2024
|MSC ships will not transit the Suez Canal Eastbound and Westbound and instead will use the Cape of Good Hope
|Contingency Surcharge, effective Dec. 23
Meanwhile, the Panama Canal, which was expanded some eight years ago to handle larger cargo ships, has been minimized by an extended drought that has reduced the level of a man-made lake that helps fill the canal’s locks.
Prior to the drought, the canal was able to let in excess of 40 ships a day pass through on their way to U.S. ports. But since the drought, that number has shrunk to about half that amount.
Ocean carriers, with no other options, have been forced to take longer and far more expensive routes.
Keep in mind these ships are massive and the longer routes mean longer and more expensive transport times and costs, since the longer routes mean these ships need to refuel more often.
Sources close to the action say these disruptions are tacking on an additional two weeks in transport time and hundreds of thousands of dollars in fuel and related expenses.
So, at a time when business is sleepy, and the climb seems harshly uphill, the canal issues seemingly are putting us further up “ship’s creek” with no paddle.