Supply Chain Challenges: Global Trade Waterways
In recent years, the world’s most crucial trade waterways have faced a series of disruptions, causing ripples across industries and economies worldwide. These disruptions, ranging from the COVID-19 pandemic lockdowns to the Ever Given’s grounding in the Suez Canal, underline the vulnerability of global supply chains. Other incidents, such as persistent drought at the Panama Canal, Russia’s blockade of Ukraine’s Black Sea ports, and ongoing attacks on ships in the Red Sea, further emphasize the need for resilient trade routes. For corporations gearing for green financing, it also emphasizes the need for visibility into supply chain data and risk assessment.
The significance of these waterways cannot be overstated, as approximately 90% of traded goods are transported by sea, according to the International Maritime Organization.
Growth in shipping traffic, proneness to congestion and collisions
Vital routes such as the Suez Canal, the Panama Canal, and the English Channel are already under strain and are expected to exceed capacity by the end of the decade due to the continuous growth in shipping traffic.
One of the busiest and most critical waterways, the Malacca Strait, witnesses around 94,000 ships passing through annually, carrying approximately 30% of all traded goods globally. Despite its importance, the strait is prone to congestion and collisions, highlighting the urgent need for enhanced management strategies. The Malacca Strait is so congested that Thailand has proposed a 100km “landbridge” at the narrowest part of the Malay Peninsula, where goods could be offloaded and transported by rail and road, avoiding the Malacca Strait.
The Hormuz Strait, situated between Iran and Oman, serves as a primary shipping route for oil from the Middle East, with around 21 million barrels passing through daily. Additionally, it carries 20% of global liquefied natural gas annually. To manage the high traffic volume and reduce the risk of collisions, the strait goes to the extent of operating a two-lane traffic system, with separate lanes for inbound and outbound vessels.
Geopolitical tensions and stressors:
Global trade waterways face mounting concerns also due to increasing geopolitical tensions. The Suez Canal, which sees on average over 20,000 vessel crossings every year, has been affected by attacks on commercial ships in the Red Sea, causing canal revenue to plummet. Similarly, security and geopolitical tensions have been a concern for shipping companies operating in the Hormuz Strait.
Extreme weather and climate change:
Climate change also causes waterways to encounter issues, and global trade to take a hit. For instance, prolonged drought has significantly affected the Panama Canal, reducing the availability of water from its feeding lakes. This has limited the number of vessels passing through and increased waiting times from hours to weeks. To adapt to the effects of drought and the climate crisis, the canal has had to implement water-saving measures and enforce draft restrictions on ships.
Supply chain disruptions, lack of visibility, and how the GreenFi solution can provide assistance.
These waterways have encountered massive disruptions and will continue to meet with similar challenges in the years to come, impacting supply chains, trade, and revenue that occur out of the world’s key shipping waterways. The climate crisis, geopolitical instability and congestion issues are compounded by social issues such as labour disputes and rising cost of living.
Corporations around the globe lack visibility into supply chain data. Despite that, there is no doubt that global trade will continue to expand. Regardless of efforts made to enhance infrastructure, traffic management systems in our most important global waterways, and strengthening security measures – proactive investment into AI-enabled automation tools that provide ESG risk assessment and due diligence is much advised. GreenFi helps with tracking ESG risks found at various stages of global supply chains, hence enabling green trade. And with GreenFi’s automation capabilities, corporations can do it faster and more efficiently than before with fewer hours and lesser manpower required, thereby leveling up sustainable financing and supply chain decisioning.
Contact us to learn more and see the demo – hello@greenfi.ai