Major transport routes are struggling with water shortages

A ship navigates the Panama Canal in the area of ​​the Bridge of the Americas on June 12, 2023 in Panama City.

Luis Acosta | Afp | Getty Images

An increase in the number of climate-related extreme weather events is damaging the world’s major shipping routes, and El Nino could make matters worse.

Low water levels in drought-stricken Panama have prompted the Central American country to reduce the number of ships passing through the critical Panama Canal.

The restrictions have created a jam of ships waiting to cross the route, which many companies like because it usually cuts travel time between the Atlantic and Pacific oceans.

The Panama Canal Authority, which manages the waterway, said earlier this month that the measures were necessary due to “unprecedented difficulties”. He added that the severity of this year’s drought has “no historical precedence.”

The damming of the Panama Canal comes shortly after the UN’s weather agency announced the onset of El Niño, a major climate event that will lead to a spike in global temperatures and extreme weather.

Peter Sands, chief analyst at Xeneta, a comparison platform for air and ocean freight rates, said maritime bottlenecks were “everywhere” but usually only catastrophic events such as the Suez Canal blockage in 2021 exposed the fragility of the “only-in”. -time” delivery model.

“I think global shipping is like the largest invisible sector in the world,” Sands told CNBC via video conference. “We all rely on services and goods shipped by sea, but unless something goes wrong, it’s hard to think about how they’ll end up on the shelves.”

What we’re seeing now is the beginning of what may be a main course next year.

Peter Sands

Senior analyst at Xeneta

Ever Given, one of the world’s largest container ships, was stranded for almost a week in March 2021 as it battled strong winds. The blockade halted all traffic on one of the world’s busiest trade routes and caused major disruptions between Europe, Asia and the Middle East.

Analysts have since warned that extreme weather related to the climate crisis could increase the frequency of events like Ever Given, with potentially far-reaching consequences for supply chains, food security and regional economies.

Referring to the unusually long delays in the Panama Canal, Sands said that although the ACP had previously imposed restrictions on ships due to low water levels, the onset of El Nino could exacerbate the problem.

“What we’re seeing right now is maybe the beginning of a major meal that’s going to come next year because (a) we could have a more severe drought as we get into the first half of 2024,” Sands said, referring to the impact of El. Niño.

“Right now, we’re not seeing the water levels that a normal year would bring. So, it’s a potential disaster in the true sense of the word,” he added.

Ships waiting to cross the Panama Canal from the Pacific side. The red square indicates the Panama Canal

“Planet Labs PBC”

El Niño — or “the little boy” in Spanish — marks a warming of sea surface temperatures, a natural climate pattern that occurs on average every two to seven years.

El Nino’s effects peak in December, but it usually takes time for the effects to spread around the world. That’s why forecasters believe 2024 could be the first year humanity exceeds the key climate limit of 1.5 degrees Celsius. In 2022, the global average temperature was 1.1 degrees warmer than at the end of the 19th century.

Falling water level

Danish shipping giant Maersk said it was “largely unaffected” by delays in the Panama Canal, although it warned that climate risks to key shipping routes are more widespread with potentially serious impacts.

“We’ve actually had to deal with some of this since the 1990s,” Lars Ostergaard Nielsen, head of the Americas liner operations center at Maersk, told CNBC via video conference.

“I think the difference is that it’s perhaps more prevalent, more severe if you will in terms of impact today.”

A crane loads an AP Moller-Maersk cargo container onto a cargo ship.

Balint Porneczi | Bloomberg | Getty Images

Citing low water levels and restrictions in the Panama Canal, Nielsen said the drought had prompted Maersk to load about 2,000 fewer containers on the same ship than usual.

Typically, Nielsen said, container ships may need to fit a maximum depth of 50 feet in the Panama Canal. Current restrictions require ships to adhere to a height of 44 feet, forcing container ships to either draw less or carry less cargo.

“Six feet of water, that makes a big difference,” Nielsen said.

Although the Panama Canal is one of the shipping routes most exposed to climate vulnerability, it is not the only waterway that struggles with the effects of extreme weather.

Low water levels in the Rhine River, an important trade route from Germany through European cities to the port of Rotterdam, are also a cause for concern.

Ships sail across the Rhine at Bacharach in Rhineland-Palatinate.

Picture Alliance | Picture Alliance | Getty Images

In late July, the water level at Kaub, a gauging station west of Frankfurt and a key point for the movement of waterborne cargo, fell to its lowest level of the year.

Falling water levels on Europe’s busiest waterway have become a regular occurrence in recent years, making it difficult for ships to transit at capacity and increasing shipping costs.

“On the Rhine … it’s mostly day-to-day tactical decisions because it’s short trips (and) it’s relatively easy to find alternatives, so you can deal with it fairly late in your processes,” Nielsen said.

“With the Panama Canal, you really have to plan for it very early because once you come across the Pacific Ocean and so on, you have no choice,” he said.

Climate risks

Global insurance broker Marsh warned in a report late last year that more attention should be paid to understanding the vulnerabilities of marine chokepoints, given the rise in climate-related disruptive weather events.

In the case of the Suez Canal, Marsh pointed to increased chances of coastal waters — where sea levels are high enough to flood infrastructure — and extreme heat as physical risks that will only be exacerbated by climate emergency.

If any of the world’s five major waterways were disrupted by accidents or political events, Marsh analysts said the effects would be felt far beyond global supply chains. The broker identified these five major waterways as the Suez and Panama Canals, the Strait of Malacca between Indonesia and Malaysia, the Strait of Hormuz between Iran and Oman, and the Bab al-Mandeb between Djibouti and Yemen.

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