Red Sea and Panama shipping delays impact $1.2trn of trade

The shipping of commodities worth $1trn were disrupted at the height of the Houthis’ attacks in the Red Sea, with supply chains hit by a further $205bn when restrictions were placed on ships passing through the Panama Canal last year during a drought, according to analysis by data and analytics firm Russell Group.

Publishing a white paper on transit accumulation risk, Russell Group says the disruptions affected two of the world’s largest shipping routes, which has “thrown shipping schedules and global supply chains in disarray”. Cargo vessels are taking longer alternative routes that delay the supply of goods and add to costs, the group explains.

Transport of crude oil, plastic materials, telephone equipment, cars and clothing was most impacted by the threat of attacks in the Red Sea between October 2023 and May 2024, the report says. Disruption to the normal flow of trade through the Panama Canal last year most affected the delivery of LPG, crude oil and vehicles, it adds.

Suki Basi, managing director of Russell Group, said the $1.25trn in potential economic impact from the two events highlights the ripple effect of disruptions to key transit routes, with reports of port congestion elsewhere. In addition, longer journeys are causing environment concerns while marine underwriters are more exposed to risk accumulation of trade through key transit routes.

“The disruption is spreading across the maritime supply chain, as key ports across the globe see an uptick in congestion, with ships arriving at ports behind schedule,” Basi said.

He added that the impact from the events could last until the end of this year. “If the disruption shows no sign of ending, firms may place orders earlier than usual to meet demand for the holiday season towards the end of the year. This would, as many analysts have already noted, add further pressure onto what is already a stressed supply chain.”

In a foreword to the report, president of IUMI Frédéric Denèfle says risk accumulation has long been on the marine insurance association’s agenda.

“The explosion at the Port of Tianjin and the aftermath of superstorm Sandy are examples where we discussed and debated the implications and subsequently shared our collective knowledge amongst our community,” he says.

“Transit route accumulation is a logical extension of this and an issue that has become much more prominent recently – due to geopolitical, climatic, economic and just plain human error events,” he adds.