Panama Canal

• 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 plays a pivotal role in facilitating approximately 80% of global trade an approximately 40% of US container trade. However, the recent drought-induced decrease in water level has necessitated a reduction in operational capacity. Consequently, canal authorities have been limited daily passage of vessels from 38 to 24, reflecting a substantial adjustment in shipping activities.
    • The total transits through the Panama Canal have significantly decreased from the years prior. They are 36% lower than 2022 and 62% lower than 2021.
  • Anticipating peak reduction in canal traffic will escalate to 40% within the current month, underscoring the profound impact of drought conditions on a vital artery of international commerce.

Red Sea and Suez Canal

• 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 ~15% of global trade and ~20% of container trade. With shipping vessels having to detour and reroute from the Suez Canal, they are traveling along the southern tip of Africa which is resulting in delayed shipments due to the longer travel times.
  • Additionally, many commercial shipping vessels coming from China were using the Suez Canal due to the drought affecting the Panama Canal – but now impacts on both are further exacerbating shipping issues.