Report: Monitoring Situations in Panama Canal and the Red Sea and Suez Canal

Feb. 15, 2024
Nonprofit Healthcare Ready released a report on potential supply chain issues due to a drought-induced decrease in water level

According to a new report published on Feb. 7 from Healthcare Ready entitled, “2024 Global Shipping Issues Threat Assessment,” the nonprofit is monitoring situations in the Panama Canal and the Red Sea and Suez Canal.

The report says that “In late 2023, Panama was confronted with an acute drought of unprecedented severity, significantly impacting the operational capacity of the Panama Canal. As a result, canal authorities were compelled to implement measures aimed at reducing shipping activities through the waterway.”

The Panama Canal facilitates approximately 80% of global grade and approximately 40% of U.S. container trade. The recent drought-induced decrease in water level has caused a reduction in operational capacity and authorities limited daily passage of vessels to 24 from 38.

The report adds that “Since November 2023, there has been a concerning uptick in attacks by Houthi rebels targeting commercial shipping vessels navigating the Red Sea. The escalating threats posed by these incidents have prompted shipping conglomerates, including Maersk, MSC, and others to take proactive measures such as temporarily halting or rerouting shipments away from the Red Sea and Suez Canal.”

The Suez Canal accounts for approximately 15% of global trade and 20% of container trade. Due to the shipping vessels being required to detour and reroute, they are traveling along the southern tip of Africa which is causing delayed shipments due longer travel times.

Many commercial shipping vessels coming from China were using the Suez Canal due to the drought affecting the Panama Canal.

“Attacks on shipping vessels, alternative shipping routes around the canals, and restrictions on the number of shipping vessels able to pass through the Panama Canal are all reasons as to why there could be severe supply chain impacts,” the report comments.

Shipping vessels are also facing constraints on capacity and size due to diminished water levels and the movement of goods has been hindered by capacity limitations and longer shipping routes. Additionally, shipping cost rates have increased since December of 2023 and are expected to stay that way.

The report concludes by saying that “Detouring from the Red Sea and having to go around the southern tip of Africa adds an additional 10-12 days of sailing and an additional $1 million in extra fuel. This means that suppliers looking for alternative shipping routes or converting to air freight will have significant cost increases which will likely affect the consumers.”

Healthcare Ready has the report.