A Tale of Two Canals

Sometimes one map says it all.

Moving goods between Singapore and Rotterdam could take an extra nine days and 3,457 nautical miles. But it all depends on the Suez Canal:

Canal Problems

With delays at the Suez and Panama Canals, now it’s “two for two.” While canal traffic mainly moves petroleum products, massive cargo ships also contain a vast array of goods.

Suez Canal

Disrupting cargo vessels that move through the Suez Canal, Red Sea missile attacks have boosted global shipping costs. They have delayed ships that are queued while others decided to take the long route around the Cape of Good Hope. Still another alternative is to take a chance and buy more insurance. All three possibilities make this link in the supply chain more expensive.

Suez Canal traffic:

Panama Canal

Then, further affecting global shipping rates, the Panama Canal has water problems because the reservoir that provides its water got inadequate rain this year. As a result, creating an 89-vessel lineup on September 28th, the Panama Canal Authority (ACP) had to cap the weight, the draft (how deep the ship sits in the water), and the number of ships in the Canal.

More expensive, detours include moving shale destined for Korea or Japan around Cape Horn instead of waiting at the Canal. Others, unloading and then reloading the ship, have used the Panama Canal Railway.

Panama Canal traffic:

Our Bottom Line: Supply

To see the impact of our canal problems, we just need a supply curve. Defined as a schedule showing all the different price quantity pairs that producers are willing and able to create, supply depends on the cost of land, labor, and capital. When cost goes up, then supply goes down by shifting to the left (although on a graph the curve looks higher, it really is a decrease in quantity):

My sources and more: To understand more about the Suez Canal’s importance, I suggest starting with this WSJ article. From there, for more on both canals, El Faro came in handy. Then, CNBC focused on Panama Canal traffic.