Global trade has always been the lifeblood of the world economy, coursing through the arteries of oceans, rivers, and canals. Yet today, these vital shipping lanes face unprecedented threats that could choke the flow of goods and destabilise economies worldwide.
War and climate change have emerged as two formidable foes challenging the movement of commodities through critical waterways. From missile attacks in strategic straits to record-breaking droughts in crucial canals, the global shipping industry stands at a crossroads, needing urgent solutions to navigate these turbulent times.
Choke points under fire
Known as “choke points,” certain narrow passages like canals and straits are essential for global maritime trade. These include the Strait of Bab-el-Mandeb in the Red Sea and the Strait of Hormuz near the Persian Gulf. Recently, these areas have become hotspots of geopolitical tension and conflict.
Missile attacks originating from Yemen have severely disrupted traffic through the Bab-el-Mandeb Strait, affecting access to the Suez Canal. This narrow passage connects the Indian Ocean to the Red Sea and ultimately to the Mediterranean Sea via the Suez Canal, serving as a historical conduit for trade between East and West.
The escalating security risks have made maritime companies hesitant to send ships through this route. It may take years before confidence is restored enough for regular passage to resume.
Simultaneously, long-standing tensions between Iran and neighbouring countries have put the Strait of Hormuz in a precarious position. As the only sea passage from the Persian Gulf to the open ocean, Hormuz is a critical artery for the world’s energy supply.
More than half of the world’s shipped crude oil passes through the Strait of Hormuz, Bab-el-Mandeb, and the Suez Canal. Any disruption in these areas does not only affect oil prices, but also causes ripples throughout economies that depend on these energy supplies.
Drought-stricken Panama Canal
While geopolitical tensions threaten some waterways, others face a different peril: climate change. The Panama Canal, a marvel of engineering drastically reducing shipping times between the Atlantic and Pacific Oceans, is grappling with an existential threat: drought.
In typical conditions, about 1,000 ships traverse the Panama Canal each month, carrying approximately 40 million tonnes of goods. The canal reduces sailing distances by 8,000 nautical miles, making it indispensable for the shipping industry. An estimated six per cent of global trade passes through this canal, according to the International Monetary Fund.
However, prolonged droughts, exacerbated by climate change and phenomena like El Niño, have led to significant water shortages in Central America. The Panama Canal relies on vast amounts of freshwater to operate its lock systems. When water levels drop, the canal authority imposes restrictions on ship drafts and the number of daily transits.
At the height of the drought in early 2024, the Panama Canal Authority had to halve the number of daily transits. Ships with deeper drafts were unable to pass, forcing them to find alternative routes or wait indefinitely. The impact on global supply chains was immediate and profound. According to maritime consultancy Clarksons Research, tonnage passing through the canal collapsed by a third due to these restrictions.
Alternative routes and their costs
With the usual passages either unsafe or impassable, shipping companies have had to chart new courses, often at great expense. The most viable alternative for many has been to reroute ships around Africa’s Cape of Good Hope. While this route is free from geopolitical tensions and droughts, it adds up to two weeks to the voyage and exposes vessels to the notoriously rough seas of the Southern Atlantic.
The financial implications are significant. Consulting firm LSEG Shipping Research notes that diverting a tanker from Asia to northwest Europe via the Cape of Good Hope doubles the transit time to 32 days and adds nearly $1 million in additional costs per voyage. Container ships, while incurring less extra cost, still face substantial increases in fuel and operating expenses. These added costs ultimately trickle down to consumers through higher prices for goods.
Asia’s longest river, the Yangtze, often referred to as China’s “golden waterway,” is another critical artery feeling the strain of climate change. In a typical year, the Yangtze ferries around three billion tonnes of diverse products to about 100 countries. However, a severe drought in late 2022 brought water levels to their lowest since records began in 1865.
The river’s width was effectively halved, and its many tributaries dried up, severely limiting navigability. The drought raised alarming questions about the future of shipping on the Yangtze. If such climatic events become more frequent, the reliability of this essential trade route could be in jeopardy, affecting global supply chains dependent on Chinese exports.
Other major waterways in peril
The threats are not confined to Asia. The Rhine in Europe and the Mississippi in the United States are also experiencing the adverse effects of climate change. The Mississippi River, which ranks second globally in inland waterways freight with 600 million tonnes transported annually, faced drought-induced bottlenecks in 2022. Similarly, the Rhine, carrying 300 million tonnes of goods each year, has seen water levels drop to points where shipping becomes challenging, if not impossible.
In Southeast Asia, the Mekong River, home to around 60 million people who rely on it for their livelihoods, has been suffering increasingly severe droughts over the past two decades. While floods often grab headlines due to their immediate and visible destruction, droughts inflict long-term socio-economic hardships, destroying crops, causing freshwater shortages, and decimating fish populations.
The combined pressures of war and climate change are impacting global shipping lanes, prompting experts to advocate for a fundamental rethinking of how goods are transported across the world. A 2024 report from the Atlantic Council, a respected US think tank, underscored the urgency of this issue.
“Climate change is now threatening the shipping lanes that underpin global commerce,” the report stated.
The disruption of the Earth’s hydrological cycle, how water moves between the land and atmosphere, is affecting the volume of water in rivers and canals worldwide. As extreme weather events become more frequent due to climate change, the reliability of traditional shipping routes is decreasing. The report calls for innovative solutions and alternative logistics strategies to mitigate these risks.
Potential solutions and alternatives
Addressing these complex challenges requires a multifaceted approach. Some have proposed designing ships with shallower drafts to navigate lower water levels. While feasible, this would necessitate a massive overhaul of the existing fleet and could reduce cargo capacity, making shipping less efficient.
Deep dredging of rivers and canals is another option to increase depth, but this is a temporary fix. Dredging is costly, environmentally disruptive, and cannot keep pace with the rapid changes in water levels caused by severe droughts.
Overland transport methods, such as rail and trucking, offer supplementary options. These “road bridges” can bypass impassable waterways but come with limitations, including capacity constraints and higher per-unit transport costs.
One of the most ambitious proposals is the construction of a new canal through Nicaragua to connect the Atlantic and Pacific Oceans. A Chinese company has claimed a 100-year concession for a 173-mile route that could accommodate ships larger than those Panama Canal can handle.
However, the project faces significant hurdles, including a $40 billion price tag, environmental concerns over pristine ecosystems, and the region’s susceptibility to hurricanes and seismic activity.
In addition to infrastructural changes, technological advancements in shipping could offer some respite. Developing more efficient ship designs, incorporating advanced materials and engineering, could allow vessels to operate effectively in challenging conditions. For instance, ships equipped with adjustable ballast systems can modify their draft to navigate varying water depths.
Moreover, adopting alternative fuels and propulsion methods, such as liquefied natural gas (LNG) or hydrogen fuel cells, can reduce the environmental impact of shipping and improve operational efficiency. These innovations not only help mitigate climate change by reducing greenhouse gas emissions but also comply with stricter environmental regulations being implemented globally.
Digital technologies like advanced navigation systems and real-time monitoring can optimise routes, allowing ships to avoid areas affected by geopolitical tensions or adverse weather conditions. The use of big data analytics and artificial intelligence can provide predictive insights into potential disruptions, enabling more proactive decision-making.
International cooperation and policy reform
Securing global shipping lanes also requires robust international cooperation. Multilateral agreements focused on maritime security can help mitigate the risks posed by geopolitical tensions. Organisations like the International Maritime Organisation (IMO) play a crucial role in facilitating dialogue and establishing regulations that enhance the safety and security of international shipping.
Additionally, investment in climate resilience is imperative. Governments and industry stakeholders must collaborate to fund infrastructure projects that strengthen the adaptability of ports and canals to extreme weather events. This includes building higher sea walls, improving water management systems, and developing early warning mechanisms for natural disasters.
Economic policies that incentivise sustainable practices can also make a significant difference. Subsidies for research and development in green technologies, tax breaks for companies that reduce their carbon footprint, and penalties for excessive emissions can drive the industry toward more sustainable operations.
In response to these challenges, new supply chains are beginning to emerge. Abu Dhabi has signed a preliminary agreement with Iraq to develop the Al-Faw Grand Port near Basra on the northern tip of the Persian Gulf. Expected to open by the end of 2025, the port aims to link Eastern and Western trade routes and will be equipped to handle containers, dry bulk, and tankers.
Similarly, Turkey and Iraq have unveiled a $17 billion road and rail project that will connect Iraq’s main port to the Turkish border and further into Europe. This 1,200-kilometre “land bridge” offers an alternative to maritime routes and could significantly alter trade patterns in the region. Notably, it bypasses the Suez Canal entirely, which could have economic implications for Egypt.
China’s Belt and Road Initiative is another example of an emerging supply chain designed to circumvent traditional maritime routes. By investing in overland routes through Central Asia and into Europe, China aims to reduce its reliance on vulnerable sea lanes. This massive infrastructure project includes the development of railways, highways, and ports, reshaping global trade dynamics.
There is a need for global cooperation, innovative thinking, and significant investment in alternative routes and technologies. The solutions are not simple, nor are they without cost. However, the stakes are high. The seamless movement of goods around the world involves not only economics but also the interconnectedness of societies and the collective prosperity of nations.