運河成為阻礙之一 (只提供英文版)

International trade drives global economic growth, and around 80% of the global movement of goods is via maritime transport (Exhibit 1). Access to the two most important canals in the world has been fundamental to this growth. Today, they are chokepoints.

One is the Suez Canal, which the Suez Canal Company of France completed in 1869. It connects the Mediterranean Sea and the Red Sea, providing the fastest and cheapest route between Europe and Asia. Around 30% of global container traffic, 12%-15% of global trade, passes through this narrow stretch of water, estimated at over US$1 trillion of goods per year.¹ That equates to 19,000 ships and revenues of US$9.4 billion in fiscal year 2023.²

In December 2023 and January 2024, the flow of traffic has been reduced by around 42%³ because of the Houthi militants' missile and drone attacks on shipping, supported by Iran. The US and UK militaries are attacking Houthi missile installations in response, but so far without stopping the attacks. The route from Singapore to Rotterdam via Suez is 8,500 nautical miles and takes 26 days. Diverting to the route around the Cape of Good Hope is 11,800 miles and 36 days, adding US$1 million to the fuel costs of a round trip.⁴

We see indications that European importers are building inventory, effectively choosing “just in case” over “just in time.” Naturally, shipping rates have rocketed; the rates from Shanghai to Europe for example are up 256% since early December.⁵ Insurance premiums have also surged, adding to costs. The last time the canal was blocked in 2021, Lloyds List estimated that it was holding up US$9.6 billion⁶ worth of containerized traffic each day. Today, energy prices are clearly at risk, as 9.2 million barrels of oil and 4.1 billion cubic feet of liquified natural gas (LNG)⁷ flow through the canal each day.

The other is the Panama Canal. Built by the United States in 1914, it negotiates a 26-meter difference in water level between the Pacific and the Atlantic Oceans by way of inland lakes and locks. As a result, significant volumes of water are needed to get each vessel across the canal.

Here, the problem is climate change. We are seeing more frequent El Niño weather patterns,⁸ which result in drought, with a direct impact on the capacity of the canal. Normally it transits 12,000 vessels per year, carrying around 600 million metric tons of goods and earning US$4.97 billion in revenues. The number of ships is now down to 24 per day, a 27% decrease.⁹ The Panama Canal Authority (PCA) attributes the situation to higher temperatures in the Atlantic, compounded by El Niño and the delayed rainy season. The PCA forecasts the water level in the key Gatun Lake to fall 2% by April 2024, which will have a bearing on the tonnage of vessels that can use the canal, due to their draught.¹⁰

While Suez is intensive in commercial goods, food and oil shipments, Panama is the route for over 20% of global soybean exports, and over 15% of maize. It is also the main route for exports of LNG to Asia.¹¹ We have seen shipments diverted to Europe, replacing volumes from the Middle East, and even resulting in lower prices for the European Union.

For US soybean exporters, the Mississippi River is the immediate problem—barge flow restrictions have been more frequent because of lower water levels caused by drought. Close to 60% of US grain exports (wheat, soybeans, corn) travel this route by barge to get to the export terminals in the Gulf of Mexico. The winner here? Potentially Brazilian soybean farmers, who ship to China via the Atlantic route around the Cape of Good Hope. Midwestern farmers can use the railroads going west instead. Or use existing rail routes to Mexico and then divert to the Mexican Pacific ports.

It is too early to say if these bottlenecks will cause inflation. But it would be prudent to treat them as inflationary pressures that risk becoming structural. This is because of the wide variation in the cost increase by subsector, depending on the supply/demand balance in their destination markets and the extent to which longer sea routes impact the availability of empty vessels for the return journey.

Something to watch.