How to keep the Panama and Suez canals open
High on the list of humanity’s most intractable problems are climate change and Middle East politics. Just ask shipowners who use either or both of the world’s major artificial waterways
Of course there are viable alternative routes. But simultaneous widespread disruption would be a strain on much of the shipping industry, not to mention the global economy
HIGH on the list of humanity’s most intractable problems are climate change and Middle East politics. Just ask shipowners who use either or both of the world’s major artificial waterways right now.
The Panama Canal is in the process of progressively reducing the maximum number of daily transits to just 18 from February, fewer than half the 40 or so it can handle when all is going well.
This is a huge hit to the Panamanian economy. But an extended drought has cut water levels to the point where there is no realistic choice in the matter. PS: It isn’t even dry season yet.
The Panama Canal Authority has responded by auctioning off slots. Japan’s ENEOS has reportedly paid as much as $4m on top of the standard six-figure transit fee just to secure a passage. But not every charterer has pockets that deep.
Such developments are bad news for many shipping segments, not least the containership operators. Many big-name container line outfits are tapping shippers up for surcharges of up to $130 a box. Ultimately, that outlay devolves to the consumer.
Unlike its Western hemisphere counterpart, the Suez Canal has known extended closures in living memory. This was most notably the case in 1956-1957 and from 1967-1973, both times in consequence of wars in the planet’s most volatile region.
It is working normally at present. But a spate of attacks on vessels using the Red Sea — unavoidable for users in either direction — will at the very least make voyages more challenging.
The International Chamber of Shipping has raised “serious concern” over the situation and hinted it would like to see some degree of naval involvement. Non-British readers may recognise in that terminology a fine display of British understatement.
There are alternative possibilities to both canals. It is viable to sail round the Cape of Good Hope instead of through the Sinai peninsula and Cape Horn instead of through the Panamanian isthmus.
Container lines serving the US east coast via the Panama Canal can call at the US west coast and use inland transport, or use the Suez Canal instead. The Alliance has announced three of its US east coast services will change routing, adding seven to 10 days to the voyage time.
Companies are already using the former route for ships with perceived links to Israel in preference to seeing those vessels hijacked by helicopter-borne Houthis or hit by Iranian-made drones.
Sadly, Israeli owners who want to exercise their right of innocent passage in the Red Sea are having to pay higher premiums purely by virtue of being Israeli.
Either cape is literally the long way round, of course. From a purely mercenary perspective, the rerouting is tonne-mile positive. But it is also more expensive and adds to transit times.
Alas, quick fixes in either Panama or Egypt are no more likely than an immediate cure for cancer or an imminent settlement to the Russian invasion of Ukraine.
The Panamanian government is considering a new dam to regulate water flows. But local public opinion may not wear the proposal, and even if popular consent can be obtained, this won’t happen overnight.
We write as the United Nations’ COP28 climate change conference gets underway in Dubai.
There are many (and bigger) imperatives to at least bring climate change under control than the fortunes of a convenient central American shortcut for ships. But if there is a long-term answer, this is it.
The Middle East remains as volatile as ever. The fighting in Gaza has not so far descended into a wider regional war. But the involvement of the Houthis — who constitute the de facto government of Yemen — is lamentable.
In the search for a settlement that provides Israel with the security it needs while recognising the legitimate Palestinian desire for statehood, our humble industry’s concerns are a long way down the diplomats’ agenda.
Even so, we hope they will recognise that freedom of navigation is always a goal worth upholding for its own sake, as the ICS rightly asserts.
Thankfully, the prospect of a simultaneous shutdown of both the Panama and Suez canals remains an alarmist scenario.
But simultaneous widespread disruption would be a major strain on much of the shipping industry, especially at a time when the global economy is convalescing from Covid-19. Politicians in a position to act, please take note.