Twin Crises Send Cargo Ships Back to 18th Century Trade Routes


A year that started with smooth sailing for the global economy — vanishing supply snarls, slower inflation and fading pandemic gloom — is ending with another gathering storm as the maritime industry and retailers that rely on it confront crises in the world’s two big ocean-to-ocean canals.

The sources of their woes are very different, but similarly acute.

Houthi militants, in a show of support of Hamas in its war with Israel, are attacking merchant ships as they sail past Yemen en route to — or from — Egypt’s Suez Canal. About 7,200 miles to the west, the world’s other key waterway in Panama is being severely disrupted by drought. Hitting routes that handle almost 20% of trade, the issues are forcing vast detours by the global merchant fleet, driving up freight bills, and boosting the shares of shipping companies.

About 180 container ships had diverted around Africa or were stopped and waiting for instructions to avoid attacks in the Red Sea, according to data late Wednesday from Flexport Inc., a San Francisco-based digital freight platform. Hundreds more are almost certain to join them unless western powers assure the industry that the Houthis, who have vowed to continue their attacks, can be quelled. Likewise, Panama diversions have been going on for weeks as low water levels restrict the number of transits.

The widespread rerouting from the canals ensnares ships hauling everything from toys and auto parts to gas to fuel to crude oil. In the short term, it will raise costs, cause weeks of delays, and could lead to the prices of some goods rising. It will also snarl the logistics of land-based firms that rely on predictable maritime schedules.

The cost to move goods in a 40-foot container from Asia to northern Europe jumped 16% over the past week and is up 41% this month, according to the Drewry World Container Index released Thursday. Likewise, fuel freight bills are jumping, with some oil majors and tanker companies saying they will avoid the southern Red Sea.