Disruption to Supply Chains: Canals Crisis and Chennai Flooding

Disruption to Supply Chains: Canals Crisis and Chennai Flooding
December 19, 2023 Hannah Marshallsay

Major disruptions are affecting two key global water routes linking East and West: the Panama and Suez Canals. These disturbances are expected to cause delays and additional charges. Plus severe flooding in Chennai is impacting manufacturing and the movement of goods in the region.

Canals Crisis Challenging Global Supply Chains

The Panama Canal’s restrictions resulting from ongoing drought and the intensification of geopolitical conflicts in the Red Sea toward the Suez Canal are causing significant concerns about potential disruption to global supply chains.

Panama Canal

For months, the Panama Canal has faced water scarcity leading to daily transit limitations, resulting in extended waiting periods. Ongoing drought-related disruptions have prompted additional measures which are anticipated to further impact supply chains. Starting on 1st January 2024, booking slots will decrease, and canal fees are set to rise. 

As a result of the ongoing disruptions, many carriers are rerouting shipments towards the Suez Canal, which in turn is undergoing operational disruptions. 

Suez Canal

Ongoing geopolitical conflicts have intensified in the Red Sea, leading to Yemen-based Houthi rebels attacking international vessels. The last 24 hours has seen two commercial ships attacked, one operated by Hapag-Lloyd and the other by Maersk. As the Houthis escalate their attacks, some carriers are now re-routing via Africa’s Cape of Good Hope to avoid the area. 

The Red Sea and Suez Canal are vital passages for global ocean freight, accounting for about 30% of yearly global traffic, especially as traffic has increased due to disruptions in the Panama Canal. This disruption is anticipated to slow down transit times and increase the costs for cargo passing through the region with the potential for carriers to impose war risk insurance premiums. 

Potential Disruption

With the recent events causing disturbances in two major global waterways, many carriers are opting to redirect shipments via the Cape of Good Hope, extending transit times by many days. The situation means constantly changing ETAs for ports, and potentially unfortunate delays in the supply chain for our customers.

Given the continued restrictions in the Panama Canal and the ongoing Israel-Hamas conflict without resolution, we anticipate increased traffic via the Cape of Good Hope in the upcoming weeks, from both the transpacific and Asia-Europe trade routes. We will continue to monitor the situation and work on minimising the impacts for our customers.

Flooding Hits Supply Chains in Chennai Region

Earlier this month, Cyclone Michaung struck Chennai and its surrounding areas, causing major disruptions in transportation services including trains, flights, and trucking. The impact of the cyclone led to the halt of vessel berthing and cargo movements at major ports including Chennai, Kattupalli, and Ennore. 

The cyclonic storm resulted in heavy rains and serious flooding, resulting in significant disturbances in the supply chain of various commodities. With some manufacturing plants still closed, and with damage made to roads and transportation infrastructure, it is likely that the movement of cargo in the area will face delays and disruption for some time to come.

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