Panama Canal and Middle East Conflict: Challenges converge

Two global issues with industry impacts that we’ve been following – one climate-related, one geopolitical – come jointly into focus in another illustration of the compounding interconnectedness of supply chains and systemic forces.

At the Panama Canal, congestion delays are now impacting container vessels with over 20 such vessels waiting to transit. Responding to ongoing capacity reductions, carriers including, CMA CGM, MSC, Hapag-Lloyd, and COSCO are implementing additional Panama Canal [Low Water] Surcharges ranging from $130 to $297 per TEU. Furthermore, logistics constraints in Panama are being pressurized by widespread protests to a mining contract, impacting highways, ports, and railways.

At the same time that shippers and carriers look to the Suez Canal as a headhaul and backhaul routing alternative to the Panama Canal, supply chain security concerns resulting from the Israel-Hammas conflict are growing in the Middle East Gulf and Red Sea regions, as evidenced by the Galaxy Leader vessel hijacking in the Bab el-Mandeb Strait – connecting the Red Sea to the Gulf of Aden, south of the Suez – and a drone attack on the CMA CGM Stymi. Maersk and ZIM have diverted vessels to avoid the Strait at the expense of longer transits.