Dual Disruption: Drought and Terror Attacks Cripple Key Maritime Routes

The global transport system is increasingly threatened by paralysis. The situation in the Red Sea and in Panama - although for completely different reasons - is causing problems. The two most important canals, crucial for maritime transport, are becoming increasingly difficult for transport companies to access. Such significant restrictions at both locations at the same time have been recorded for the first time in history.

As reported by "The Wall Street Journal", more than 50 ships were waiting in line for passage through the Panama Canal in recent days. The cargoes they carry are extremely diverse - from propane cylinders to food.

The reason for the problems in the region is a prolonged drought. It forced the canal operator to limit the number of crossings, which significantly extended the waiting time. And it raised the fees - up to eight times higher. The situation could worsen - the volume of cargoes passing through the Suez and Panama canals has already fallen by more than one-third. Officials hope that the drought, the worst in over a century of the crossing's history, will subside in May.

Almost on the other side of the globe, ships carrying containers through the Egyptian Suez Canal face a similar problem, but for completely different reasons. Some units, feeling threatened by Yemeni rebels, opt for passage with the assistance of the navy while others choose a much longer journey around the Cape of Good Hope.

The concerns are not unfounded. Houthi rebels have attacked more than 50 ships since November. Including a cargo ship carrying a load of fertilizers, which sank. Three people died in a drone attack.

So far, the problems at both canals have not yet impacted consumers, but this is slowly changing. Some companies have already announced that due to the lack of supplies, they are reducing production. We know what this can lead to from the times of the pandemic when disrupted supply chains drove up the prices of many products - including cars. Problems are also affecting clothing companies, some of which send goods from Asia by air, not by sea.

The situation is unusual, says a representative of one of the companies specializing in maritime transport.

For the first time, navigation is disrupted in both canals simultaneously, which forces us to plan the units' movements far in advance - explains in a conversation with "WSJ" the head of a company dealing with LPG transport.

The situation is mitigated by the fact that companies have learned from the chaos that occurred in the supply chains during the pandemic. Some have built up larger stocks. Disruptions in the Suez Canal extended the average voyage time by about 10 days, so the effects of the problems in terms of lack of goods in the stores are not yet noticeable.

However, they are feeling the pinch due to higher prices. Manufacturers have to hike them, because the crossing through the Panama Canal now costs around £400,000, but the costs in some cases may be several times higher. The escalation of the conflict in the Red Sea area and the prolonged drought could increase them even further.

Trade volumes passing through the Suez fell by more than 40 percent in December and January compared to the previous year according to UN data. Major container carriers, such as Maersk and Hapag-Lloyd, have not yet returned to the Red Sea despite attacks on the rebels - we read in the analysis of "WSJ".

Maritime transport plays a key role in the global trading system. Its neuralgic points are narrow shipping lanes that constitute strategic passages shortening travel time and reducing costs.

Among them, three are most important. The Panama Canal, connecting the Atlantic Ocean with the Pacific Ocean, allows ships to avoid a longer route around Cape Horn. Annually, about 14 percent of U.S. maritime trade and a quarter of the exports of some Latin American countries pass through here.

The Suez Canal is a connection between the Mediterranean Sea and the Indian Ocean. It greatly shortens the travel time between Asia and Europe. The only alternative for covering this route is to circumnavigate Africa.

The Strait of Hormuz is nonetheless significant, through which 20 percent of the world's oil passes. The greatest importance for the functioning of the strait is Iran. Part of the shipping route runs through the territorial waters of the country. Meanwhile, some scenarios of conflict development in the Middle East assume that Israel, attacked by Palestinian terrorists, in retaliation would attack Iran. This could raise oil prices to an exorbitant level of around £200 per barrel - warns Bank of America.