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Updated Feb 5, 2024, 8:54pm EST
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Shipments through Suez and Panama canals drop amid geopolitical and climate woes

Insights from TIME, the New York Times, and Bloomberg


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MARTIN BERNETTI/AFP via Getty Images
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A drought in Panama and ongoing attacks by Houthi rebels on ships in the Red Sea have forced logistics firms to avoid the Panama and Suez canals in recent months. The dual crises have wreaked havoc on the global shipping industry, causing freight prices to skyrocket and increasing the amount of fossil fuel emissions emitted by cargo ships globally.

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Diversions and reroutes are increasing fossil fuel outputs

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Source:  
TIME

To avoid potentially being attacked in the Red Sea, many cargo ships are instead taking the long way around Africa to reach consumers in Europe and North America. Each extended journey may emit some additional 2,519 tons of CO2 emissions, or 13.9 rail cars’ worth of coal, an expert from a sustainable transport advocacy organization estimated to Time. It would take 41,652 tree seedlings 10 years to sequester that carbon, the magazine reported. For every day that the Houthi attacks continue, there could be more than 160,000 tons more of emissions released into the atmosphere than if ships took shorter routes through the canal. But while reroutes contribute to increased emissions, the results are marginal compared to higher ship speeds. If ships pick up the pace to make up for longer routes, emissions will rise exponentially, the sustainable transport expert said. “Shipping speed, not distance, is actually the biggest threat for climate impacts. If a ship speeds up, it’s not like emissions go up relative to the increase.”

Shipping revenues have dropped, further hurting local economies

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Sources:  
Bloomberg, Le Monde, Reuters, The Economist

Suez Canal Authority chief Osama Rabie has said on an Egyptian talk show that income from the canal dropped by almost 50% to $428 million in January compared with $804 million the same period in 2023, Bloomberg reported. The number of ships navigating in the canal in January also fell 36% from last year’s totals, the lowest number since the April 2021 blockage caused by a stuck ship. More than 20% of the world’s container trade goes through the Suez Canal, and Egypt had been in process of expanding the canal, which connects the Mediterranean to the Red Sea, to counteract declining transit through the thoroughfare in recent years. The drop in canal transit fees has also coincided with a drop in tourism revenue to Egypt and a decline in remittance payments since the start of the war in Gaza. While the International Monetary Fund will soon deliver a $3 billion relief package to Egypt, it will only bring “short-term relief” while also “further [entrenching] the generals who have hollowed out the economy,” The Economist reported.

Panama is looking at new solutions to reduce long-term drought

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Sources:  
Reuters, Bloomberg, New York Times

While the Suez Canal connects bodies of water at similar elevations, the Panama Canal connects the Atlantic and Pacific oceans using a system of interconnecting locks that lift ships up and down by relying on water from nearby lakes. But climate change and infrastructure changes are causing that water to dry up. Recent lock expansions did not include a new reservoir to pump fresh water, while changing weather patterns have brought dry conditions, accelerating the evaporation and draining of vital Lake Gatún. To help resolve the issue, around 1,700 local coffee farmers in Panama have been participating in a 15-year old program in which they plant trees near the canal and adopt more environmentally friendly farming practices to reduce soil erosion. “It’s true that by reforesting the farms with coffee we don’t solve everything, but it helps,” a leader of a local coffee grower group told Reuters. The Panama Canal Authority is also weighing other longer-term fixes, such as a new reservoir and piping water from other places, but it’s not clear if these efforts will be enough.

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