Problems in the Suez and Panama Canals – freight costs explode
Published: Thursday, Feb 22nd 2024, 12:00
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80 percent of freight worldwide is transported by ship. Problems on the Suez and Panama Canals force long detours. This drives up costs.
Significantly fewer cargo ships are traveling through the Suez Canal due to the tensions caused by the Gaza conflict. The UN Conference on Trade and Development (Unctad) reported in Geneva on Thursday that 42 percent fewer ships had sailed through the link between the Red Sea and the Mediterranean this January compared to the peak period in the first half of last year. Container spot prices from Shanghai in China to Europe had risen by an average of 256 percent between the beginning of December and the end of January.
In the Red Sea, the militant Islamist Houthi from Yemen have recently repeatedly attacked ships on the important sea route through the Suez Canal. By firing on merchant ships, the militia wants to force an end to the Israeli attacks in the Gaza Strip, which followed the unprecedented massacre by the Islamist Hamas in Israel on October 7.
Impairments due to conflicts and low water levels Globally, freight transportation is also impaired due to the Russian war of aggression against Ukraine in the Black Sea and low water levels in the Panama Canal. Unctad warned of the "potentially far-reaching economic impact of prolonged disruptions to container traffic, which could threaten global supply chains and lead to delivery delays, higher costs and inflation. The full impact of higher freight rates will be felt by consumers within a year."
According to Unctad, sea transportation accounts for 80 percent of global freight movements. Freight carriers sometimes have to take long detours to avoid the canals. Costs rise due to longer transportation and higher insurance costs. In addition, the environmental impact increases due to the longer routes and because captains travel faster in order to keep to delivery schedules as far as possible.
On the route from Singapore in Southeast Asia to Rotterdam in the Netherlands, higher fuel consumption and faster driving could increase greenhouse gas emissions by 70 percent on a return trip, according to Unctad estimates.
"The increasing uncertainty and the bypassing of the Suez Canal via the Cape of Good Hope have both economic and environmental costs that put additional pressure on developing countries," Unctad reported.
©Keystone/SDA
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