Problems in the Suez and Panama canals continue to drive up delivery costs and exacerbate shipping delays. The Suez Canal is embroiled in a geopolitical mess, with the Yemen-based Houthi rebels attacking vessels in reaction to the war in Gaza. Meanwhile, the Panama Canal’s setbacks are climate-based, where a drought has meant less water to feed the canal’s intricate system of locks that enable ships to cross through the waterway. 

Both issues have resulted in increased shipping costs and lengthy delays. Despite being minor hiccups compared to the bottlenecks produced by Covid in 2020 and 2021, many operators are warning of elevated consumer prices should the difficulties continue. 

In terms of solutions, minimizing Houthi attacks is undoubtedly doable. US coalition retaliatory strikes have eliminated up to a third of the rebel outfit’s assets. The Panama Canal, on the other hand, is in the midst of one of the worst droughts since it became operational. The drought began in mid-2023, and some estimates point to more rainfall come the end of May 2024. 

Roughly 18% of global trade volume passed through the two canals in 2023. Volvo and Tesla already halted vehicle production for two weeks in January due to parts shortages. Many apparel companies are turning to air delivery to ensure spring fashions arrive on time. In 2020 and 2021, shippers passed higher costs to consumers, fomenting inflation across an expansive basket of goods.

During the height of the pandemic, daily freight routes between the US and Asia skyrocketed by nearly five times to over $20,000 per box. Today, Suez interference has resulted in average sailing times lengthening by approximately ten days. Most businesses learned a valuable lesson from the pandemic and built up their inventories to mitigate the risk of running out of goods. Well-stocked warehouses, however, might be the only reason consumers do not feel a bigger effect, and those warehouses cannot remain well-stocked for long.

Approximately 14% of seaborne trade to and from the US comes through the Panama Canal. In normal conditions, the canal handles in the neighborhood of 36 ships crossings daily. That figure fell to 24 in November 2023 and has plummeted further, although some recent rainfall has helped. A crossing typically costs $500,000 per ship, but some desperate operators now pay up to $4 million. 

Hapag-Lloyd, Maersk, and a handful of other large carriers have yet to return to the Red Sea. Others are paying private security to guard against rebel attacks, and Suez toll revenue predictably plummeted by nearly half – $804 million in January 2023 to $428 million in 2024.