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Suez and Panama Canal disruptions threaten global trade and development
Global trade is facing significant disruptions as two of the world’s most vital maritime chokepoints – the Suez Canal and the Panama Canal – experience severe challenges driven by geopolitical tensions and climate-related risks.
Dr.G.R.Balakrishnan Oct 25 2024 Shipping News

Suez and Panama Canal disruptions threaten global trade and development

 In addition to straining global supply chains and undermining economic growth, these disruptions are driving up costs, reshaping trade patterns, upending the flow of energy and food supplies and threatening to exacerbate food security risks, especially in vulnerable economies.

The number of ships transiting through the Suez Canal hit rock bottom. The latest available data shows that by mid-October 2024, the average of 33 transits per day was 57% below its previous peak, 55% lower than one year ago and just 4% above the lowest recorded four-week average. In contrast, Panama Canal traffic is showing signs of recovery.

Rerouting vessel capacity around Africa’s Cape of Good Hope has surged by 89%. While this keeps goods moving, it adds significantly to costs, delays and carbon emissions. Longer routes have led to increased port congestion, fuel consumption, crew wages, insurance premiums and piracy risks, all while raising overall costs and greenhouse gas emissions. Global ton-miles rose by 4.2% in 2023, further straining supply chains. By mid-2024, rerouting away from the Red Sea and Panama Canal increased global vessel demand by 3% and container ship demand by 12%.

Port hubs like Singapore and major Mediterranean ports are struggling with rising demand for transshipment services, adding to global congestion and delays.

Small island developing States (SIDS) and least developed countries (LDCs) are bearing the brunt of these disruptions.
In response to these growing challenges, UN Trade and Development’s (UNCTAD) Review of Maritime Transport 2024 calls for swift and coordinated action to safeguard global trade and mitigate the effects of these chokepoint vulnerabilities.

The organization emphasizes the need to:
• Strengthen international cooperation and enhance monitoring systems to ensure well-functioning shipping routes, provide early warnings and enable the rapid, efficient rerouting of vessels.
• Diversify shipping routes and support regional trade initiatives to reduce dependency on long-distance routes and boost intraregional trade flows.
• Invest urgently in resilient infrastructure at key chokepoints to minimize the impact of climate risks and conflicts.
The challenges of the Suez and Panama Canals highlight the fragility of global supply chains to disruptions, including those caused by mounting climate and geopolitical risks.

With seaborne transport carrying over 80% of global trade volume, ensuring the resilience of maritime infrastructure and accelerating the transition to low-carbon shipping are critical for maintaining the flow of goods worldwide.