Climate Crisis Threatens Major Canals and Global Trade

Panama Canal

Experts are sounding the alarm over the potential closure of crucial maritime routes, including the Panama Canal, due to extreme climate conditions leading to lowered sea levels. This phenomenon, driven by the ongoing effects of climate change, poses a serious threat to global trade and logistics.

Denmark's Maersk, the world's largest shipping company, has issued a warning about the escalating climate risks to key trade routes. While the delay in the Panama Canal's operations due to climate-related issues has not yet significantly impacted logistics, Maersk emphasized the increasing severity of climate-related risks to major maritime pathways.

The situation is compounded by the potential exacerbation of the problem by El Niño events. El Niño, meaning "the little boy" in Spanish, refers to abnormal warming of sea surface temperatures in the central and eastern tropical Pacific Ocean. These events occur every 2 to 7 years.

In Panama, which is already grappling with drought, the water levels in the Panama Canal have decreased, leading to a significant reduction in the passage of ships through the Central American gateway. Canal authorities have declared an urgent need for action, attributing the unprecedented water shortage to severe drought conditions.

Beyond the Panama Canal, Germany's Rhine River is also experiencing lower water levels, causing logistical challenges. The Rhine River serves as a crucial trade route, connecting European cities to the port of Rotterdam in the Netherlands.

By the end of July, the water levels at key cargo hubs such as Kaub in Germany reached their lowest point of the year.

Adding to the complexity, the rise of El Niño events could further worsen the situation. If sea levels not only decrease but also rise, canals could become immobilized. The Suez Canal, for instance, faces a risk of flooding its infrastructure due to rising sea levels.

In the logistics industry, five major waterways are identified as critical: the Suez Canal, the Panama Canal, the Malacca Strait between Indonesia and Malaysia, the Hormuz Strait between Iran and Oman, and the Bab-el-Mandeb Strait between Djibouti and Yemen. Disruption of any of these waterways would have a massive impact on the global supply chain.

The real-world repercussions were evident in 2021 when the container ship "Ever Given" was grounded in the Suez Canal for six days due to high winds. This incident had a profound negative effect on global logistics. Maersk, in particular, suffered significant losses during the blockage and even sought substantial compensation from the ship's owner, Bernhard Schulte of Germany.

As extreme weather events and sea level changes persist, the international community faces an urgent need to address climate-related risks to vital trade routes and global supply chains.