The shipping industry, including sea, river, and canal transportation, is among the most vulnerable to climate change. The extremely high temperatures and dry conditions we witnessed last summer offer a glimpse into the potential impacts on global shipping.
How did it directly impact shipping?
In the summer of 2023, prolonged heat and low rainfall caused Germany's Rhine River, a critical artery of the European economy, to reach historically low water levels. The key navigation point west of Frankfurt hit its lowest mark in 30 years.
Similarly, the Panama Canal faced low water levels due to months of drought in Central America, reducing the maximum draft for large vessels from 15.24 meters to 13.4 meters. This forced ships to offload cargo to pass through, increasing transportation costs by $300-500 per container.
In North America, record low water levels in the Mississippi River stranded numerous vessels, disrupting agricultural shipments and causing an estimated $1 billion in losses.
Indirect Effects on Shipping
Indirectly, climate change also affects shipping through energy supply disruptions. Increased demand for air conditioning, especially in regions with underdeveloped power infrastructure like South and Southeast Asia, could lead to fuel shortages for shipping.
Rising Temperatures and Future Risks
As we brace for another hot summer, with 2023 already the hottest year on record since 1850, experts predict 2024 could be even hotter due to human-induced climate change and the El Niño phenomenon.
Tips for Trade Businesses
To mitigate these impacts, we recommend:
- Utilizing multiple transportation methods such as rail, road, and air to reduce reliance on shipping.
- Enhancing contract risk management by including clauses that address responsibilities during extreme weather.
- Building flexible supply chains and considering regional inventory points to reduce transportation time and costs.
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