Not only Suez but also Panama, the ``Two Grand Canals'', key points in global logistics, are in crisis March 7, 16:40

``We've never experienced anything like this before. It's a double whammy.'' These

were the words of a top executive at an American shipping company.

The double whammy refers to two canals that play an important role in global logistics, making navigation difficult or restricted.

One is the Suez Canal.

Yemen's Houthi rebels have repeatedly attacked ships around the Red Sea, making navigation difficult.

The other is the Panama Canal in Central America.

Navigation is restricted due to lack of water.

What is happening on the ground?

We also tracked the impact on the global economy, including Japan.

(American Bureau Reporters Shohei Yano and Daisuke Ezaki)

Large ships waiting their turn fill the sea...

A number of large ships seem to fill the sea.

This is a sight that spreads out off the coast of the Panama Canal.

When our reporting team visited Panama in early February, there were many ships anchored on both the Pacific and Atlantic sides, which are the entrances to the canal, due to traffic restrictions, waiting for their turn.

The reason for the restrictions is severe water shortages.

A huge amount of water is required to pass through this canal, but due to the effects of climate change, the canal is facing record water shortages that are said to be the worst in the past 100 years.

Difficulties I never expected

Even executives at the Panama Canal Authority, which manages the canal, can't hide their surprise.

Panama Canal Authority Deputy Director Marotta

: ``We have experienced water shortages in the past, and we have managed to cope with them, but this time it is a new challenge. We never expected them to restrict passage.''

Here I will explain what kind of canal the Panama Canal is.

It is located in Panama, Central America, and is a key maritime transport hub connecting the Pacific and Atlantic oceans.

The canal has a total length of 80 km.

To travel between the Pacific and Atlantic Oceans, ships must pass through lakes that are 26 meters above sea level.

For this reason, a special mechanism is used to raise and lower ships through multiple water gates called locks.

In 1903, the United States concluded a treaty with Panama, leased land, and began development.

Although difficult construction continued, it took 10 years to open in 1914.

This established a new shipping route that dramatically shortened the sea route from the east coast of the Americas to the west coast, and from the Americas to Asia.

The canal was returned to Panama from the United States in 1999, and remains there to this day.

We received special permission to conduct interviews at the heart of the Panama Canal.

Miraflorence Komon is located just after entering the canal from the Pacific Ocean side.

The first thing that caught my eye when I arrived at the scene was a huge, slow-moving wall.

It was a large ship sailing through the canal.

Trolleys ran on tracks parallel to both sides of the canal, pulling ships with ropes.

In the narrow waterway, the boat was pulled from both sides to keep its balance so it wouldn't hit the sides.

With the water gates closed, water was drained from the waterway, and it took 10 to 15 minutes to lower the ship by about 8 meters before proceeding toward the Pacific Ocean.

Between 13,000 and 14,000 ships pass through the Panama Canal each year, and Japan ranks third after the United States and China in terms of cargo volume by destination.

Corn, soybeans, and LPG (liquefied petroleum gas) are transported from the United States to Japan via the Panama Canal.

Is climate change the cause of the crisis?

The Panama Canal uses large amounts of water to lift and lower huge ships.

Each time a ship passes through the canal, approximately 190 million liters of water are required.

This water is supplied by Lake Gatun in the central region, but the amount of water in this lake has decreased significantly.

Climate change is thought to be one of the causes.

Due to the effects of the El Niño phenomenon, which causes sea surface temperatures to rise above normal on the Pacific side of Central and South America, there was 30% less rain than normal last year, resulting in a severe drought.

During severe droughts, the water level drops by more than 2 meters.

Although efforts are being made to reuse water, water shortages continue.

Previously, the number of ships allowed to pass through the area per day was 36, but is now limited to 24.

Luz Calzadilla, director of Panama Institute of Meteorology and Hydrology

: ``This drought is very similar to 2014-2016 (when Mega El Niño occurred).A strong El Niño phenomenon appeared in January, and reached its peak at the end of February. "Global warming has exacerbated this phenomenon."

There is also an auction to compete for the right of passage.

When we spoke to a company that handles the permitting process for ships passing through the Panama Canal, they said that since the restrictions began, they have been flooded with inquiries from logistics companies and trading companies who want to allow ships to pass through the Panama Canal.

Company staff

: ``Some customers had to wait 35 to 40 days due to the lack of water in the canal.We have to offer some alternative plan.''

There is even an auction authorized by the Panama Canal Authority where companies who want to pass through the Panama Canal as soon as possible compete for passage rights.

Jose Cervantes, representative of a shipping company in Panama, said, ``

There is also unofficial information that the auction price has gone up to $2.5 million (370 million yen).''

The reality of logistics disruption is that shipping companies are forced to make major detours.

The disruption at the Panama Canal was also having an impact on global logistics.

To find out more about the situation, I visited Genco Shipping and Trading, a major American shipping company headquartered in New York.

This company owns 45 ``dry bulk carriers'' used to transport grain, iron ore, coal, etc., and transports American soybeans and corn to Asian countries such as Japan and China.

It took 40 days to deliver grains such as soybeans and corn from ports in the southern United States to Asia via the Panama Canal, the shortest route.

However, due to restrictions on transit through the Panama Canal, the company decided it would be better to reroute the ship instead of having to wait or pay high fees to transit.

By the fall of 2023, nearly all ships will be rerouted through the Atlantic Ocean, from the Mediterranean Sea through the Suez Canal and the Red Sea.

The length of the voyage was extended by 13 days to 53 days.

The increasingly tense situation in the Middle East is adding to this.

There has been a series of attacks on ships by the Houthis around the Red Sea.

Surprisingly, in January 2024, the company's ship was hit by a Houthi attack in the Gulf of Aden near the Red Sea.

CEO Wovensmith vividly described the situation at the time of the attack.

John Wovensmith, CEO, Genco Shipping and Trading: ``

I remember when we first got the call that a missile had been fired and had actually hit a ship. It was a very scary situation. It was about 30 minutes after the attack. I was able to speak to the captain 45 minutes later. The missile had hit the gangway above the deck, but not the superstructure. It was a very big crisis."

The company has determined that the situation is not suitable for passage through the Suez Canal, and is currently taking steps to reroute the ship via the Cape of Good Hope in South Africa.

The required number of days has been extended by 17 days to 57 days, and an increase in transportation costs is unavoidable.

CEO John Wovensmith: ``

The additional approximately 20 days it takes to transport grain from a southern U.S. port to Asia is a significant loss and reduces the supply of ships that can carry the cargo.It also reduces fuel costs. This will result in additional costs for customers.”

World container ship freight rates have increased by 1.8 times!

Restrictions on Panama Canal traffic due to attacks on ships near the Red Sea.

It's a double whammy, and container ship freight rates are skyrocketing.

According to British research firm Drewry, although freight rates have fallen slightly recently, as of February 29, they had risen approximately 1.8 times compared to a year ago.

It is said that import and export companies are currently bearing most of the burden of these soaring freight rates, but if this continues for a long time, it could end up hitting the wallets of consumers directly in the form of higher prices for final products. .

Transport by land to the Port of Los Angeles

Restrictions on Panama Canal traffic have surprisingly led to an increase in the amount of cargo handled on the West Coast of the United States and Los Angeles.

An increasing number of companies are moving cargo from the East and South overland to the West Coast, crossing the continent by truck or rail, which costs more than ships.

Masakazu Sakano, NX America Los Angeles Branch

: ``There is no doubt that it is having an impact.We are analyzing that companies are increasingly using the West Coast. I think there is a possibility that there will be some kind of impact on the cost of the cargo being shipped."

Due to problems with the two canals, Man & Machine, a keyboard and mouse manufacturer based in Maryland, has changed its route from the Port of Los Angeles to rail parts, which had previously been imported by boat from Taiwan to the East Coast. I switched to

However, it took nearly two months longer than before to arrive, resulting in a parts shortage, temporarily halting production, and incurring additional costs.

Clifton Blumand, CEO of Man & Machine

: ``If I use the last of my money, I won't be able to do anything until the next part arrives from the Far East.My income and that of my employees have plummeted.''

Residents oppose plans to combat water shortages

Local plans to address the Panama Canal's water shortage include building new dams and reservoirs to secure water levels in the lake.

If this is realized, the number of ships that can pass through the route will be increased from the previous 36 ships per day.

However, residents of the planned area have voiced opposition.

If the reservoir were built, 63 villages in the basin would be underwater, and approximately 2,000 people would be displaced from their hometowns.

Digna Benitez, vice president of the residents' group

: "We demand that our rivers do not submerge our entire community. We have lived, worked and eaten on the banks of rivers."

Residents' groups are appealing for a review of the plan by submitting a written request to the Canal Agency.

On the other hand, tolls such as Panama Canal tolls amount to 20% of total government revenue.

The authorities hope to persuade residents to proceed with the plan and secure a stable income.

It is expected that the Panama Canal will have enough water and that traffic restrictions will be lifted in May, when the rainy season begins in this region, but it remains to be seen when the drought and water shortages, which are thought to be caused by climate change, will end and whether they will occur again. No one knows for sure.

The Panama Canal transformed logistics connecting the Americas and the rest of the world 110 years ago.

And the Suez Canal, which connected Europe and Asia 155 years ago.

These two barriers are facing a simultaneous crisis that has not occurred in 100 years due to the combination of water shortages, which are thought to be caused by global warming, and the tense situation in the Middle East.

The impact may even extend to the prices of products that we consumers receive.

American General Bureau reporter

Shohei Yano Joined

in 1999

Okayama Bureau, Akita Bureau, International Department, Seoul Branch

Currently in charge of the United Nations at the American General Bureau (New York)

America General Bureau Reporter

Daisuke Ezaki Joined

in 2003 After working in

the Miyazaki Bureau, Economic Affairs Department, and Takamatsu Bureau, he currently belongs to the Bureau.