International shipping update: The Red Sea, Panama Canal & Baltimore Bridge


The world continues to navigate its way around the difficulties of international shipments. Adverse weather in some areas, droughts and low water levels in others, and the ongoing conflicts in the Red Sea, all of which are affecting the costs and time taken to relocate overseas.

While the Panama Canal seems to be returning to nearly-normal operations, concerns about the future survival of the manufactured shortcut continue to rise. The constant flux between warming and cooling weather patterns, further fueled by human-caused climate change, means these fluctuating water levels may well continue to cause disruption.

Across the pond, several European countries are combatting the opposite problem, being hit with torrential rain and harsh winds.
Isolated, these may be seemingly local issues. However, they all fall part of a domino effect put in motion by the ongoing conflicts in the Red Sea; ships rerouting to avoid Houthi attacks, facing hardship with other trade routes, all contribute to rising costs, delays, and complications.

So, what do you need to know? And what can you do to prepare your shipment?

Panama Canal Authority increases allowable draft ahead of schedule

With the early arrival of the rainy season, the Panama Canal Authority (ACP) has increased the maximum authorized draft to 45ft.

The Panama Canal, an 82km man-made waterway in Central America, connects the Pacific Ocean and the Atlantic Ocean and facilitates faster transportation.

Under normal water levels and conditions, the Panama Canal has a capacity for 34 to 38 daily transits. Yet, due to an arid year in 2023, the ACP reduced transit numbers due to low water levels – the second lowest in 110 years of operation.

These low water levels contributed to a reduction in the number and size of vessels passing through the canal. This contributed to a forced reduction in the amount of cargo, increased costs and time-in-transit, and nearly halved the volume of trade through the canal.

Many carriers journeying from Asia to the United States, as a result, found themselves rerouting through the Suez Canal. As well as adding significant time and costs to the journey, the ongoing Houthi attacks in the Red Sea saw the number of shipments dwindling overall.

Originally scheduled to take effect in mid-June, the increase in the allowable draft was brought forward as a result of the onset of the rainy season in the Panama Canal Watershed. Since May 26, the water levels of Gatun and Alajuela Lakes have, for the first time in 2024, risen above levels recorded on the same date in 2023.

As of May 26, the number of daily transits in the Panamax Locks increased from 17 to 24, and starting June 1 the number of daily transits in the Neo-Panamax Lock will increase from seven to eight. This brings the number of vessels passing along the canal daily back up to thirty-two, close to pre-drought numbers.

However, the artificial waterway relies on rainfall, and with rainfall levels decreasing year-on-year, the ACP has no choice but to act. Especially when considering the consequences of El Niño, referring to the weather pattern that contributes to above-average sea-surface temperatures that continually develop across the east-central equatorial Pacific.

October 2023 saw the driest month on record, with the canal region seeing a 41% reduction in rainfall. This potential reoccurring drought threatens to continue disrupting and increasing the cost of moving the $270bn (£213bn) worth of cargo that flows through the Atlantic-Pacific shortcut annually.

The ACP’s first-ever chief sustainability officer, Ilya Espino de Marotta, states: “We don’t want this to be a recurrent issue. We don’t want to drop transits or tonnage.” As a result, the ACP is exploring ways to take sustainable action to ensure the survival of the waterway, including the construction of reservoirs, dams and even seeding clouds to encourage rainfall in the region.

While a resolution has been found, anyone moving goods between the east coast of the Americas and Asia or Oceania, is urged to be watchful of the situation; factor the potential for delays into planning, and speak to us for advice.

The latest on The Red Sea

The continued conflict in the Red Sea maintains its grip on sea freight activity, with major shipping lines continuing to re-route around the Cape of Good Hope.

 Our full explainer and advisory article on the issue is available here

It seems this conflict is not slowing down any time soon, with Houthi forces launching anti-ballistic missiles and armed drones at military vessels and container ships brave enough to journey through. Although no casualties or damage came from these attacks, Houthi official Mohammed Al-Bukhaiti wrote online: “We will meet escalation with escalation.”

With no end in sight, many companies are preparing to ship goods for the festive season earlier than usual to curb disruption and delays from these attacks. Consequently, the demand for already-dearth containers has skyrocketed, the cost and demand for international shipments have spiked, and businesses have begun to focus efforts on long-term inventory management.
According to Xeneta, a Norwegian shipping service, the average cost of shipping a 40ft container between the Far East and Northern Europe at short notice hit a staggering $4,343 at the end of May, approximately three times higher than the same period last year.

As a result of peak shipping season happening sooner (typically, the peak occurs late summer and autumn to prepare for the likes of Black Friday and Christmas), these cargo ships join the struggle for space.

Globally, key facilities like Algeciras (Spain), Tanger Med (Morocco), and Brani (Singapore) are finding themselves at capacity and turning away requests as a result of the disruption, congestion, and added days to journey times. Singapore reported 7-day delays as a result of congestion.

The early shipping peak also means these ships will find themselves voyaging during typically warmer, drier months within the northern hemisphere. This, as the Panama Canal drought demonstrated, means ships may find themselves traveling when lower water levels are present, causing further delays.

Yet, as a result of the ongoing effects of climate change, it’s also the other end of the extreme weather freight vessels could be affected by; Reuters recently noted that parts of the River Rhine in Germany, an important route for commodities including minerals, grains, animal feed, coal, and oil products, remained closed due to heavy rainfall and flooding. In Italy, freight trains have been reported to have been pushed off their tracks by strong winds, and last year several terminals and lines were closed due to damages.

We have been reaching out and talking to those impacted, to explore alternative routings, modes, and services and ensure timely delivery of goods to destination.

Baltimore Bridge: Larger ships gaining access

Nearly two months after its collision with the Francis Scott Key Bridge, the Dali cargo ship, along with significant amounts of debris, has now been removed from the Patapsco River. The access channel now has a draft of 50ft, a 400ft wide clearance, and a vertical clearance of 214ft.

The port, a critical US trade hub used to handle vehicles and agricultural products, saw the temporary closure of the Fort McHenry Limited Access Channel when Dali struck the Baltimore Bridge, causing it to collapse and killing six construction workers. Three other temporary channels were opened, and remain open while clearing work continues, yet none offer the same width or depth that McHenry does.

With the Dali and debris removed, maritime traffic can begin returning to normal, easing congestion in other US ports and providing relief to many businesses.
Talking with CBS News, Rear Admiral Shannon Gilreath of the U.S. Coast Cards said: “Over the last eight weeks, we’ve moved more than 500 commercial vessels through alternate channels into the Port of Baltimore.”

Much work is to be done to restore the channel to its original 700ft width and remove all steel from the riverbed. The BBC reports: “Authorities in the state of Maryland estimate it will cost up to $1.9bn (£1.5bn) and take more than four years to rebuild the bridge.”

Yet, concerns now should be directed at the potential disruptions that may come later in 2024 as a result of labor negotiations.

Xeneta reports: “The International Longshoremen’s Association’s six-year contract with the United States Maritime Alliance, which represents port terminal operators and ocean carriers on the East Coast, expires on 31 September – and no new agreement has yet been reached.”

Without an agreement, there will be significant and widespread implications, almost certainly leading to increased rates for ocean freight container services.

Advice and how we can help 

As we continue to see supply chain volatility, driven by maritime incidents, we are advising our clients in the coming weeks or months to:
·        Bake additional lead time into plans as far as possible.
·        Budget for increased transport costs

Feel free to contact Crown Logistics to help you working through the challenges that this situation is presenting together.