The Suez and Panama Canals, which typically see over 36,000 merchant ships pass through each year, are facing significant challenges in 2024. Missile and drone attacks by Houthi rebels in Yemen, funded by Iran, have led to the suspension of transits through the Gulf of Aden, prompting the United States to lead a multinational task force to protect the world’s merchant fleet. Additionally, the Panama Canal is experiencing delays due to an unprecedented drought, with traffic flow currently at 75% of normal capacity. This is caused by El Niño, which generates above-average water temperatures across the eastern equatorial Pacific Ocean every two to seven years.
These choke points for vessel traffic have significant implications for global trade. The closure of the Suez Canal for six days in 2021, caused by the container ship Ever Given, slowed trade between Europe, the Middle East, and Asia. The decision by major merchant vessel operators to suspend Suez routes will require affected vessels to transit around South Africa’s Cape of Good Hope, adding thousands of freight miles and days of delay. This will also increase air emissions subject to the European Union’s Emissions Trading System, with 50% of such air emissions subject to taxation. Additionally, vessels transiting through high-risk areas may incur additional war risk premiums.
These challenges are impacting the global merchant fleet and have significant implications for trade routes, emissions, and costs for vessel operators.
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