12 December 2023Article
Canal Crisis Update - A view ahead to 2024

Two of the main global waterways connecting East to West, the Suez and the Panama Canal are undergoing significant disruptions. Delays and surcharges will Impact the logistics and supply chain sectors.

The global supply chain industry is being challenged by unprecedented disruptions centred around two of the main global waterways connecting East to West, the Suez and the Panama canals. Significant impact on the logistics and supply chain sectors is expected with delays and increasing operational costs ahead. Please find below a status update on canal operations.

Panama Canal

The Panama Canal has been experiencing water shortages for months with restrictions limiting the number of vessels transiting daily having been put in place, resulting in longer waiting times. As drought continues to disrupt its operations, further actions have been taken and are expected to impact the container market, which was initially not heavily affected. From January 1st, 2024, booking slots will be reduced and canal tariffs will increase.

Many carriers will apply surcharges to all services transiting through the Panama Canal, amounting to around 100$-200$ per TEU and resulting in increased operational costs for shippers. Alongside increased costs, the number of vessels allowed per day will be further reduced; The 22 daily slots currently available will drop to 18 from February 2024. The number of container ships waiting has doubled since last summer and waiting time is not expected to improve in the near future.

As a result of the ongoing disruptions, many carriers are rerouting shipments towards the Suez Canal, which in turn is undergoing operational disruptions. THE Alliance carriers (Hapag-Lloyd, HMM, ONE and Yang Ming) will divert a total of 17 Asia - East Coast Panama transits to the Suez Canal from December 2023, adding about 1 week to the total transit time.

Suez Canal

Due to the current geopolitical landscape, safety around the Red Sea waterway has been severely undermined, seeing international merchant vessels transiting through the Suez Canal becoming airstrike targets. As a result, some carriers are introducing war risk insurance premiums, further adding to operational costs for shippers.

To further cope with the current circumstances affecting the Red Sea, more and more carriers are diverting shipments in favour of Africa’s Cape of Good Hope, adding days to their journeys.

A new layer of complexity has been added to canal operations as a result of a recent incident involving a container ship transiting through the waterway. Last Wednesday, cargo ship One Orpheus collided with a floating bridge on the eastern lane of the canal due to a rudder failure. While major disruptions were observed and canal operations resumed shortly after the rudder was fixed, the incident has increased uncertainty on the route.

With these recent events disrupting two of the main global waterways, 2024 is projected to be challenging for the ocean freight industry and global supply chain planning, resulting in rising operational costs and longer lead times for many shippers. An increase in air cargo demand on routes across the globe has been noted with airlines increasing capacity to meet demand.

At Woodland, we will try to minimize the impact for our clients and all shipments affected and will keep you updated throughout. Should you wish to discuss your 2024 supply chain plans or have any questions as to how to optimize processes, please contact us here.

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