Two major bottlenecks and the risk of imbalance in the global supply chain

Houthi rebels have attacked on cargo vessels passing through the Suez Canal (connecting the Mediterranean with the Red Sea) since November 2023 is the first main bottleneck in the supply chain of the Asia-Europe corridor. To avoid the risk of being attacked, most shipping lines including MSC, CMA, Maersk, ONE, Evergreen, Hapag-Lloyd, and so on …have changed their routes to go pass Africa’s Cape of Good Hope with longer transit time (about 10-15 days compared to the Suez Canal transit schedule) and higher transportation cost (on some routes, ocean freight rates have been increased sharply by 100 – 300%).

Vessels passing through the Suez Canal. (Collected image)

The second major bottleneck is the limitation of vessels passing the Panama Canal currently. In October 2023, this artificial canal connecting the Pacific and Atlantic Oceans encountered a severe drought although dry season in Panama is usually from December to April of the following year. The Asia – East Coast US corridor is facing the risk of disruption when vessels passing here have to wait for many days. Due to the drought, since November 2023, the number of vessels passing through the canal has been cut from 32 vessels/ day to 24 vessels/ day, and will only be 18 vessels/ day from February 1, 2024 (Source: https://pancanal.com/).

Vessels passing through the Panama Canal. (Collected image)

The risk of blockage in both the Suez and Panama canals at the same time seriously affects the international supply chain in both the Asia-Europe and Asia-North America corridors. The change in longer shipping routes will lead to an imbalance of empty containers for export markets in Asia in the short term (in the next few weeks) due to returned vessels being severely late compared to the original schedule. That leads to a shortage of empty container supply for shippers in the coming periods.In addition, some shipping lines are likely to shift vessels from the less affected markets to the European, and USA markets to meet these regions’ cargo transport needs. The possibility of shifting vessels from Asia through the East Coast (USA) to the West Coast (USA) will cause a shortage of transport supply capacity for the East Coast, USA.

The imbalance in the logistics supply chain may lead to difficulties for cargo owners when facing rising transportation costs in both inbound materials for production and outbound finished products to foreign markets. To promptly respond to the above situation, almost all shipping lines and logistics providers are looking for alternative routes, and solutions to limit the impact and disruption of the global supply chain. At Vantage, we find and update alternative routes of shipping lines invariably to our customers with more choices at commitment: always accompany customers and partners in overcoming arduous and volatile periods of the transportation market.

We are always ready to listen and solve your logistics needs.