They are known as ‘choke points,’ the canals and rivers through which the world’s trade is transported by ships of all kinds and sizes. And suddenly they are under threat. In fact, two kinds of threat. Missiles fired from Yemen have dramatically cut traffic in and out of the Suez Canal via the narrow Strait of Bab-el-Mandeb in the Red Sea, a historic choke point between the Indian Ocean and the Mediterranean Sea. It may be years before maritime companies feel safe sending their ships through this route.
Simultaneously, long-running tensions between Iran and neighbouring states continue to jeopardise passage through the Strait of Hormuz, the only sea passage from the Persian Gulf to the open ocean. The importance of these straits can be gauged by the fact that more than half of the world’s total shipped crude production passes through Hormuz, Bab-el-Mandeb and the Suez Canal. That’s quite apart from a huge variety of other cargos. While relief to these sea passages can only come through peace, the Panama Canal and other great waterways face a threat that cannot come through politics.
It is the existential risk of record-breaking droughts that affect the Rhine, Mississippi, Mekong and other waterborne trade routes. The prevailing situation proves the vulnerability to terrorism and climate of the supply chains that have evolved over many years, in some cases over centuries.
A thousand ships
To take the Panama Canal first. In more normal times about 1,000 ships go through its locks each month, carrying some 40 million tonnes of goods. As the International Monetary Fund explains; “The Panama Canal can reduce the sailing distance from the Atlantic to Pacific and vice versa by a vast 8,000 nautical miles. Its efficiency and time-saving nature make it a crucial resource for the shipping industry, with an estimated six percent of global trade passing through it.”
Climate change is now threatening the shipping lanes that underpin global commerce
But when slots are in short supply, ships that cannot book one (or cannot afford to do so) must find a different route. In times of peace this would be the Suez Canal, which typically transits 12 percent of global trade, worth around $1trn a year. But with no other option available the shipping giants have been sending their vessels around Africa’s Cape of Good Hope, which extends the voyage by up to two, often extremely rough, weeks of sailing. This raises fuel and operating costs, causes delays and increases the price of the landed goods. According to consultant LSEG Shipping Research, the transit times from diverting a tanker from Asia to northwest Europe via the Cape of Good Hope have doubled to 32 days and added nearly $1m for each voyage. The extra costs for a container ship are less but still significant.
Happily, there has been some relief in the Panama Canal. The restrictions on passage have been progressively eased – but not lifted – as the El Nino-triggered drought throughout Central America goes on its way. In mid-April the hard-pressed Panama Canal Authority approved the passage of up to 32 ships a day including those with deeper draughts of nearly 14 metres. At the height of the drought in early 2024, approvals had been roughly halved. Some vessels could scarcely clear the bottom of the canal. The resulting disruption to supply chains was profound.
Due to restrictions, tonnage passing through collapsed by a third, according to maritime consultancy Clarksons Research. And although the drought is lifting, if the rainy season is late then restrictions could return.
Golden waterway
In the meantime, major natural waterways are at risk and the economic implications are profound. Dubbed China’s ‘golden waterway,’ Asia’s longest river, the Yangtze, which ferries some three billion tonnes of a hugely diverse range of products in a good year to about 100 countries, suffered a nearly cataclysmic drought in late 2022 that made the shipping world wonder about the river’s future navigability. And it still does.
Water levels at one of the giant ports on the 3,915-mile-long river fell to the lowest level since records began in 1865 as simultaneously depths at the river’s many tributaries followed suit. Although officials preferred not to tell the worst, the truth is that the Yangtze was reduced to half its normal width. If another drought hits the region, nobody knows how low the Yangtze could go.
Other logistically important and historic waterways like the Rhine, Mississippi and Mekong are also under threat. The Mississippi, which also experienced drought-induced bottlenecks in 2022, ranks second globally in inland waterways in terms of freight carried, with 600 million tonnes a year, while third-ranked Rhine carries 300 million tonnes.
The Mekong, the longest river in Southeast Asia along which some 60 million people live and work, has suffered increasingly severe droughts for two decades. Although it is floods that make the headlines as houses, cars, cattle and people are swept along a muddy torrent, it is droughts that create the most damage. “Unlike flood, drought only brings socio-economic hardship to riparian countries, especially riverine communities,” notes the multinational Mekong River Committee, pointing to ruined crops, fresh water shortages and disappearing fish.
Considerable uncertainty also hangs over the war-torn straits. If peace is restored, which looked unlikely in mid-April, their militarily strategic position in an increasingly volatile region makes the case for alternative supply chains even more urgent. Supply chains have many elements and, as Oxford-based PortWatch explains, delays in these choke points lead to further disruption all along the route, including ports that depend on the smooth functioning of the canal. Most of the research points in one direction. In early 2024, a report by the Atlantic Council, a respected US think tank, feared that “climate change is now threatening the shipping lanes that underpin global commerce.”
Citing a massive imbalance in the way that weather works, the report said; “The disruption to the way water moves between the Earth and the atmosphere – the patterns of rain, evaporation, condensation, and runoff that affect how much water flows through the world’s waterways – appears to be here to stay. Global supply chains depend on these waterways. With climate change expected to make extreme weather more frequent, a big rethink of how goods move around the globe is necessary.”
Beached business
Others express similar concerns about future disruption to the world’s complex highways to the sea. “Pressure on global shipping routes is creating stress in global supply chains again, soon after the acute disruption experienced in the pandemic,” insurer Swiss Re noted in a much-quoted February 2024 report. Entitled Navigating shipping disruptions: signs of rougher seas ahead, the author more or less echoed the Atlantic Council: “More frequent droughts are likely to jeopardise transit volumes in the Panama Canal, and climate change is already affecting river shipping, as seen in the Rhine and Mississippi. We view these as headwinds to the long-term resilience of global shipping trade.”
A big rethink of how goods move around the globe is necessary
But what can be done? Some have suggested shallower-bottomed vessels, others deep dredging. While the first is practicable but would send half the world’s river-going fleet to the scrap yard, the second is routine on most of the great waterways but on nothing like the required scale. Then there are ‘road bridges,’ basically overland transport by trucks and trains that would supplement or even replace waterways when they become impassable.
The boldest alternative by far would be another canal connecting the Pacific and Atlantic Oceans through Nicaragua. A Chinese company established by a certain Wang Jing, supposedly having ties to the Beijing government, has claimed a 100-year concession and a 173-mile route has been drawn up for a waterway that would take far bigger vessels than the Panama Canal, in fact ships like giant bulk carriers with depths of 26 metres. But the project would cost $40bn and would pass through pristine Lake Nicaragua, rainforest and wetlands, not to mention a geophysically unstable region.
As the Smithsonian magazine reported in 2014 when digging was supposed to begin, “the canal route lies in the middle of a hurricane belt.” Other more definite initiatives should help plug emerging gaps in the global supply chain. Abu Dhabi has signed a preliminary deal with Iraq to jointly develop a strategically located new port on the northern tip of the Persian Gulf near Basra. Named Al-Faw Grand Port, it is expected to open by the end of 2025 and link ‘east and west,’ according to its supporters. It will be big enough to take containers, dry bulk and tankers.
As war disrupts sea routes in the region, new supply chains are emerging. In early 2024 Turkey and Iraq unveiled a 1,200-km, $17bn road and rail link project – a land bridge, in short – that will connect Iraq’s main port to the Turkish border and then into Europe.
Ominously for Egypt, it will avoid the Suez Canal entirely.
