Climate change and geopolitics have created a perfect storm for global shipping. Creative thinking and a system of compensation could relieve the pressure
A cargo ship passes through the Panama Canal's Agua Clara locks on Gatun Lake in Colon, Panama, on April 14, 2024. The number of ships allowed through the drought-hit Panama Canal each day will be increased thanks to signs of an improvement in water levels, authorities said on April 15, 2024.
Image: Martin Bernetti / AFP
It has been a bad year for global trade logistics, with Houthi attacks in the Red Sea, drought in the Panama Canal and further shipping chaos in the form of the Francis Scott Key Bridge collapse in Baltimore. Falling water levels in Gatun Lake, which provides water for the system of locks on which the Panama Canal depends, have forced authorities to restrict the canal’s capacity. Vessels are required to pay large fees in order to cross, and many are waiting up to a week in line to do so. This adds exponentially to costs and further disrupts global supply chains.
[This article has been reproduced with permission from IESE Business School. www.iese.edu/ Views expressed are personal.]