[Freight Weekly] Panama Canal's Costly Drought

Logistics News for February 22, 2024

🆘 Panama Canal crisis foretells ongoing challenges for global trade

The Panama Canal continues to face an environmental crisis as water resources remain low due to drought conditions caused by El Niño. What you need to know:

• Panama Canal Authority (ACP) estimates a loss of over $700 million in global trade this year alone.

• McKinsey estimates the shortage in the lake that supplies the canal with water could cut cargo volumes by 35 percent.

• Nearly 4,000 transits, east to west, could be forced to transit around the Cape of Good Hope, in South Africa, or the Strait of Magellan.

• The Red Sea crisis instigated by Iran-backed Houthi militants will further compound the activity of transiting to Western Europe.

• Rail operators in North and South America are looking to provide an alternative by offering forwarding and intra-coastal port access.

Bottom line: Ocean carriers won’t be the only ones impacted by the ongoing drought and the limitations on Panama Canal transits. This will drive shipping costs from origin to delivery, making the supply chain costlier, riskier, and ultimately push inflation back up.

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This newsletter is brought to you by the FFS Load Board. TODAY, right now, shippers need quotes on the following loads:

🚢Sea container - concrete statues, 1,050 kg: Bali, Indonesia, to Minnesota, USA

🚢LTL, sea - cargo TBD: Mumbai, India, to London, United Kingdom

🚚Half container - coconut milk and tropical fruit: Tacoma to Malo, WA, USA

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📈 BY THE NUMBERS

⛽ Diesel: $4.109 gal (⚖️from $4.109 last week) - EIA

✈️ Air Cargo Index (Jan ‘24): 176.1 (⬇️from 184.8 in Dec ‘23) - FRED

🚢 Global Container Index: $3,423.00 (⬆️from $3,392.80 on 2/15) - Freightos

📰  WHAT ELSE IS GOING ON IN FREIGHT

😱 Spare Capacity in U.S. transport sector allows it to better Sea: Analysts tell Transport Topics that U.S. logistics companies are better equipped than other nations to handle disruptions amid the Red Sea crisis due to spare capacity added during the pandemic.

🤯Port of Los Angeles has a near-record start to 2024: Gene Seroka, the executive director of the Port of Los Angeles, reports that January 2024 was the sixth straight month year-over-year of growth as the major container terminal outperformed January 2023 by 18% and only second to COVID booms.

😏China avoiding U.S. trade tariffs by rerouting trade through Mexico: Data from the freight analytics consultancy Xeneta reports that 20ft containers from China to Mexico hit records during the first three quarters of 2023. This comes as Mexico became the largest exporter of goods to the US. China is shifting volume to the United States by rerouting through to Mexico across the Southern Border. Read this analysis on the matter from the Financial Times (paywall).

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